BIP-44

BIP-44 provides a deterministic wallet structure that allows a single seed phrase to generate an entire tree of private keys for multiple coins, accounts, and addresses. Its primary purpose is to create a universal standard (m/44') so that wallets from different developers can interoperably derive the same keys from the same seed, ensuring user funds are recoverable anywhere.

The standard defines a 5-level derivation path: m / purpose' / coin_type' / account' / change / address_index.

• Purpose: Fixed as 44' for BIP-44.
• Coin Type: A registered index (e.g., 0' for Bitcoin, 60' for Ethereum).
• Account: Sequentially numbered user accounts (e.g., 0' for primary).
• Change: 0 for receiving addresses, 1 for change addresses.
• **Address Index: Sequentially numbered addresses (e.g., 0, 1, 2`).

The hierarchy enables powerful organizational features:

• Accounts: The account level (0', 1', etc.) allows users to create separate, isolated wallets for different purposes (e.g., savings, trading) under one seed.
• Change Addresses: The change level segregates externally visible receiving addresses (0) from internal change addresses (1), improving privacy.
• Address Gap Limit: Wallets follow a convention (typically 20) for scanning unused addresses to maintain efficiency.

BIP-44 enhances security by using hardened derivation (denoted by an apostrophe ') for the first three levels (purpose', coin_type', account'). Hardened derivation prevents a compromised child private key from being used to deduce its parent or sibling keys, isolating security breaches. Only the final change and address_index levels use non-hardened derivation for convenient public key generation.

BIP-44 is the foundation for nearly all modern HD wallets (e.g., Ledger, Trezor, MetaMask). Its impact includes:

• Single Backup: One 12-24 word mnemonic seed backs up all derived keys.
• Multi-Asset Support: A single wallet can manage hundreds of different cryptocurrencies.
• Discovery Standard: Wallets can automatically discover all funds by scanning the defined path structure, making recovery seamless.

BIP-44 establishes the canonical path format: m / purpose' / coin_type' / account' / change / address_index. This structure organizes keys into a logical hierarchy, where:

• purpose' is fixed as 44' for BIP-44.
• coin_type' identifies the cryptocurrency (e.g., 0' for Bitcoin, 60' for Ethereum).
• account' allows for separate accounting entities.
• change distinguishes between receiving (0) and change (1) addresses.
• address_index is a sequential number for generating new addresses.

The standard enables a single seed phrase to manage keys for multiple cryptocurrencies and accounts. The coin_type field allows wallets to segregate assets by blockchain, while the account field creates distinct sub-wallets for different purposes (e.g., savings, trading). This design prevents address reuse across chains and improves organizational clarity for users and developers.

A core benefit is simplified backup. Users only need to secure their initial master seed (often as a 12 or 24-word mnemonic phrase). From this single secret, the entire deterministic tree of private keys for all accounts and currencies can be regenerated. This eliminates the need to back up individual private keys, drastically reducing user error and improving security practices.

BIP-44 is the de facto standard for most modern cryptocurrency wallets, including Ledger, Trezor, MetaMask, and Trust Wallet. Its universal adoption ensures interoperability, allowing a seed phrase from one BIP-44-compliant wallet to recover funds in another. This has been critical for user sovereignty and the growth of the non-custodial wallet ecosystem.

Common BIP-44 paths in practice:

• Bitcoin First Receiving Address: m/44'/0'/0'/0/0
• Ethereum Main Account: m/44'/60'/0'/0/0
• Bitcoin Testnet: m/44'/1'/0'/0/0
• Litecoin: m/44'/2'/0'/0/0 These paths are computed from the master seed using HMAC-SHA512 and elliptic curve cryptography to produce child keys.

The foundational standard for Hierarchical Deterministic (HD) wallets. It defines a tree structure for deriving child keys from a single master seed using cryptographic one-way functions. This enables the creation of an unlimited number of keys without needing new backups, forming the basis for BIP-44's multi-account structure.

• Master Seed: The root of the entire key hierarchy.
• Extended Keys: Contain both the private key and a chain code for derivation.
• Deterministic: The same seed always generates the same sequence of keys.

Defines the creation of mnemonic seed phrases for generating the master seed used in BIP-32. It converts entropy into a human-readable list of words (12, 18, or 24 words) for easier backup and recovery.

• Wordlist: Uses a standardized list of 2048 words.
• Seed Generation: The mnemonic, combined with an optional passphrase, is processed with PBKDF2 to create the master seed.
• Interoperability: Allows wallet recovery across different software that supports the standard.

An early proposal that introduced the purpose field in the HD path derivation. It suggested using the first level after the master key to indicate the "purpose" of the subtree, ensuring different wallet standards can coexist without key collision.

• Path Structure: Proposes m/purpose'/*.
• Namespace: BIP-44 formalizes this by setting a fixed purpose value of 44'.
• Separation of Concerns: Allows distinct logic for different coin types or use cases.

The structured string that defines how to navigate the HD tree to generate a specific key pair. BIP-44 standardizes this path format for multi-account, multi-coin wallets.

• Standard Format: m/purpose'/coin_type'/account'/change/address_index
• Hardened Derivation: Indicated by an apostrophe ('), prevents deriving child public keys without the parent private key.
• Change Addresses: The change level (0 for external, 1 for internal) helps with wallet organization and privacy.

The process a wallet uses to scan the blockchain for funds belonging to a BIP-44 seed. It systematically checks derived addresses within defined limits to find UTXOs or account balances.

• Gap Limit: A wallet typically scans a set number of consecutive unused addresses (e.g., 20) before stopping.
• Multi-Account: Can discover funds across multiple account' indices.
• Performance: Efficient discovery is crucial for wallet synchronization and user experience.