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- BIP 32 (Hierarchical Deterministic Wallets)
BIP 32 (Hierarchical Deterministic Wallets)
BIP 32 is the Bitcoin Improvement Proposal which introduced the standard of Hierarchical Deterministic (HD) wallets and extended keys to Bitcoin.
BIP 32 was a significant improvement for Bitcoin wallets in several ways. First, HD wallets greatly improved the interoperability of wallets, as a set of keys could be transferred between wallet software with a single extended private key (xprv).
Likewise, the recoverability of wallets was improved, as a single seed could recover the entire wallet. This improvement was extended with BIP 39, which made seeds easier to store and remember.
Lastly, BIP 32 enabled watch-only wallets, which can store and generate new addresses, allowing the user to receive payments and check their balances without ever needing to use private keys. Watch-only wallets enhance a user’s security by allowing them to keep their private keys in cold storage, while continuing to receive bitcoin, track balances, and craft transactions.
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