BIP32

BIP32, or Hierarchical Deterministic Wallets, is a Bitcoin Improvement Proposal that defines a method for generating a tree-like structure of cryptographic keys from a single seed. The system enables the creation of many private and public keys within a single portable wallet, simplifying backup and recovery while supporting flexible key management.

At the core are extended keys, which bundle a private or public key with a chain code and meta-data. A master key pair is derived from a seed using a key-derivation function based on HMAC-SHA512. From any parent key, child keys can be generated through a defined algorithm that uses the parent key, the chain code, and a child index. This yields an extensive key hierarchy where each node has a private/public key and its own chain code.

Derivation comes in two modes. Non-hardened derivation (indices below 2^31) can be performed starting from a public key, allowing public Key and address generation without exposing private keys. Hardened derivation (indices at or above 2^31) requires the private key and prevents deriving child private keys from a public key, enhancing security if an extended public key is compromised. Extended keys are serialized, commonly as xpub and xprv, using Base58Check encoding with fields for depth, parent fingerprint, child index, and the chain code.

BIP32 is widely used in wallet implementations and serves as a building block for higher-level standards such as BIP44. It supports recovery from a single seed and enables flexible key management, including watch-only wallets and multi-account structures. Security considerations focus on protecting the chain code and the seed, as exposure can compromise additional derived keys.