By using different receive addresses each time, you are not tying yourself to one address, which makes it more difficult for anyone to track how much Bitcoin you have.
Not only that but you may also want to split your Bitcoin up into different addresses for organisational reasons, perhaps have some for your children, grandchildren, other family members or you have a business and want a separate pot for each branch of the business.
This is where “child seeds” or “child keys” come in to play – let’s explore.
To describe what child seeds are, it’s easiest to consider a simple family tree.
At the top of the tree you have your great grandparents, who give birth to your grandparents, who give birth to your parents who then give birth to you and so on.
In a similar structure, this is how child seeds work with Bitcoin.
You have your main seed which generates the parent key, which generates the child keys than can generate grandchild keys and so on – this is illustrated in the figure below.
“Hierarchical Deterministic Wallet” or HD Wallets for short are what you need if you want to create child seeds. It’s a bit of a mouthful so let’s break it down.
Hierarchical means that the keys and public addresses can be organised in to a family-tree like structure.
Deterministic means that the way the child keys are created are the same every time.
These HD wallets were created as a result of the BIP0032 and BIP0044 standards that have been implemented by Bitcoin developers to make it easy to create many public keys from a single seed with the added benefit of not having to know or have access to the seed itself.
Another advantage of this is that public keys can be organised depending on what you want. As mentioned earlier you can have a different set of child keys for one aspect of your life, or have different keys for different departments of a business you might be running.
Thankfully, a lot of the technical leg work is done for you with modern hardware wallets as these will generate the child seed for you and meet the BIP standards mentioned before.
Unless you are a Bitcoin wallet developer, you won’t need to dive in to the technical details although it’s never a bad thing to understand how it works from a high level as you should still practice safe Bitcoin.
HD wallets are created by a single “root seed” or private key. This will be a completely random number but is made user-friendly by converting it in to a memorable 24 word seed phrase.
From this root seed, everything else in the HD is created. This means that even if your hardware wallet fails, you can actually re-create all your keys and addresses again as long as you have the root seed or 24 words.
This is why we always say, don’t lose your 24 word seed phrase – here are some tips on keeping it safe.
Share with a friend
If you thought this information was helpful why not share it on your favourite social media network and encourage others to learn more about Bitcoin