What does deterministic wallet mean?

blockchain events

Nowadays modern technology can help you in so many ways. One of them is a cryptocurrency wallet that is based on blockchain technology for eCommerce. Something like a Bitcoin wallet, the deterministic wallet progressed and his basic function is to help you with your cryptocurrencies.

What is a deterministic wallet?

Unlike an old-style Bitcoin wallets, which generate new Bitcoin addresses and private keys randomly as needed, in a deterministic wallet, all of the data is generated using a specific algorithm from a single seed. The seed is a standard way of coding the keys of your wallet.  The recovery seed consists of a combination of words placed in a specific order that gives you the possibility of recovering private keys. Deterministic wallets have two key properties that are advertised by their developers. The first of these properties is the concept of a Master Public Key(MPK).

This allows the server to create as many public keys as necessary for receiving funds, but a compromise of the MPK won’t allow an attacker to spend from the wallet.

What are the types of deterministic wallet?

  • BIP32     

These wallets go beyond by featuring the property of hierarchy. 

  • Electrum wallets    

They are limited to down-level, although one surely enhances the Electrum protocol to get it in the form of hierarchical.

How do deterministic wallets work?

The master public key property is perhaps the more surprising feature of deterministic wallets. The Bitcoin public keys are not the same thing as Bitcoin addresses but a closely related form. They can be subtracted and added just like normal integers can and the same arithmetic operations can be done on two levels to generate private keys.     

What are the advantages of deterministic wallet?

  1. Your privacy is well guarded because of the hierarchical structure mechanism  
  1. You don’t have to think about losing your cryptocurrencies       
  1. These wallets can generate an unlimited number of addresses

  What is an HD wallet?

The deterministic wallet is also called HD wallet, or Hierarchical Deterministic wallet and its purpose is generating hierarchical trees. What does it mean? Well, a hierarchical tree is like a key structure that starts with the seed master key. The seed grown by a tree with branches is initiated from the original seed. Many of the branches we see represent multiple addresses derived from the seed. As in real life,to plant a new tree, you need the original seed, so everything is based in one place and you will always be able to return to the original seed. When you return an HD wallet  with a seed key, the wallet handles all the private keys of that seed.When this scan is complete, your transactions and funds will be refunded.    

As we said, all key pairs are derived from a single seed, the entire wallet can be recreated on the basis of that seed. HD wallets can allow for an entire suite of crypto-wallets to be generated from a single seed phase. Also, it can be useful for storage, investment and spending your cryptocurrencies.   

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