The origins of HD wallets.
Cryptocurrency tech is developing so fast, that apps and algorithms we used only a few years back seem outrageously outdated now. It is probably hard to imagine for many bitcoin users today, that there used to be a time when people had to make do with simple crypto wallets that were not HD wallets. Hierarchical deterministic wallets practically dominate the cryptocurrency scene. Let’s take a look at the issues that have predetermined their quick rise and spread.
This is a bit hard to encompass now, but only a few years back, users had to manually create a new address for their transaction and back up each previous pair of a private key and a public address. This greatly took away from bitcoin’s and similar cryptos’ fluidity because keeping track of your backups, especially when you make transactions often, is a hardship. One wrong step here, a miswritten combo, and your coins can be lost to the wind. People came up with numerous tracking systems, to no avail. People used the same addresses for multiple transactions, which led to many hacks and privacy breaches because when several transactions can be attributed to the same address, it’s much easier to disclose the sender’s identity and to perform a personalized attack.
Eventually, this became a huge issue and a solution was offered in the form of an HD wallet. In short, what an HD wallet does is it rids you of the necessity to keep track of transaction backups. How does it do it? Each pair of a private key and a public address gets a seed phrase attached to it, so the wallet can restore the information for each transaction using this seed phrase. And, this seed phrase becomes the only thing you, as a user, need to hold on to and keep safe. Much simpler from the handling point of view, right? And at the same time, technology-wise, it doesn’t take one bit from the security, because each transaction still gets a new pair of key and address.
The first HD-wallets were introduced with BIP 32 in 2011 and afterward improved with BIP 44.
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