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Derivation Path

A derivation path determines how your private keys are derived from your seed phrase and which addresses are generated from those keys.

The BIP32 Standard​

The BIP32 (Bitcoin Improvement Proposal) standard defines how hierarchical deterministic (HD) wallets work. HD wallets use a tree-like structure where every branch can produce a new keypair (private and public key). This means you only need to back up the seed phrase, and the wallet can regenerate all keys and addresses from that phrase.

Anatomy of a Derivation Path​

A typical derivation path looks like this:

m / 44' / 0' / 0' / 0 / 0

Here’s what each part means:

  • m - The master node (your seed phrase). This is the root of the tree.
  • 44' - The purpose or protocol. The apostrophe ('), known as the hardened separator, indicates that these keys are hardened for security.
  • 0' - The coin type. For Bitcoin, this is always 0 (but for other cryptocurrencies, it would be a different number).
  • 0' - The account. A wallet can have multiple accounts, each with its own address.
  • 0 - The change type (0 for external addresses, 1 for internal addresses like change).
  • 0 - The address index. This is used to generate a new address each time.

Common Derivation Paths​

Here are some of the most common derivation paths used in Bitcoin wallets:

BIP-44 (Universal Path for Multiple Coins)​

BIP-44 is the most widely used standard for creating wallets that manage multiple cryptocurrencies. It’s designed to support multi-asset wallets and has a clear, structured path for generating different addresses.

Standard Path:

m / 44' / 0' / 0' / 0 / 0
  • 44': Indicates the wallet follows BIP-44 for multi-asset support.
  • 0': This specifies the Bitcoin coin type.
  • 0': Refers to the first account in the wallet.
  • 0: The external addresses (i.e., the ones used to receive funds).
  • 0: The first address in the external address list.

Addresses starts with 1:

137oszRjc8tdUVWr5nSp6fzSND938PStMZ