What are HD Wallets? Their Advantages and Disadvantages
We cannot imagine a cryptocurrency without a wallet. The wallet gives you a function to send and receive crypto.
A wallet is nothing but a digital file that stores all your crypto holdings, and also creates an address for you to send and receive crypto.
In the wallet, Private Key ensures that you’re the owner of a coin and Public Key is to make transactions. It works like an e-mail, in the e-mail, an e-mail address is used to send and receive e-mails password ensures you’re the owner of that e-mail.
The wallet generates a pair of Private and Public keys when making a new transaction. If you want to make a backup of all transactions then, you should back up each keypair, but this process is annoying when a large number of transactions occur.
However, you can use only one key pair to make every transaction, but this practice is not good from the privacy point of view, because someone can track your transaction behavior.
That is why we have HD wallets to tackle these issues.
What are HD Wallets?
Hierarchical Deterministic Wallet is an abbreviation for HD wallets.
HD wallet creates a hierarchical private and public key pair from seed praise.
These wallets offer a partial resolution to the problem of record-keeping and privacy. I say “partial” only because nothing is perfect, and there are always attackers waiting to take advantage of the system.
In HD wallet, hierarchical key pairs start by creating a seed of 12 to 18- to 18-word sentences, then from that seed, master public and private key pairs are generated.
The master key continues to create more key pairs those key pairs also create more keypairs. All these addresses are derived from seed praise.
You can think of a hierarchy kind of like a tree shown in the below image.
It is important to note that the master private key’s sole purpose is wallet tree regeneration.
With HD wallets, you don’t have to think of losing your crypto if your hard drive gets corrupted and the wallet unrecoverable you can simply create a new wallet using the same seed, and all of the addresses and private keys from your old wallet will come back again exactly as they were before.
Also, this hierarchical structure of key pairs makes it nearly impossible to reach out to the master key that is how your privacy is well guarded.
In Bitcoin HD wallet deterministic maths was defined under Bitcoin Improvement Protocol 32 (BIP 32) later some improvements were added in BIP 39, and BIP 44, also Eletcronium uses similar mechanisms.
However, HD wallets are not all perfect, it has its advantages and disadvantages.
Let’s look at some Advantages of HD wallets
#1 You don’t need to backup all your keys, whenever you make transactions, you just need to back up the Seed praise securely.
#2 Your privacy is well guarded using the hierarchical structure mechanism.
#3 You can store multiple unique currencies within the same HD wallet just by following instructions for that currency.
#4 n-Number of public addresses can be generated to prevent re-use of addresses.
#5 If you lose the backup of a private key from the hierarchical tree, still your other addresses will remain safe.
#6 You can move millions of dollars across borders without using a hardware wallet or mobile wallet app.
#7 Confuse new users, as your receiving address changes every time.
Let’s look at some flaws in HD wallets
#1 If you chose hard to memorizable seed praises then, it is difficult to back up all your key pairs when the wallet is stolen or lost. Studies show that passphrases like “glow date cost bloody curve wheel cousin picture ring finally bubble press” are no easier to memorize which is why chose memorizable key praise.
#2 Another major problem is, that you can securely hand out child keys with no risk to the parent key, and you can hand out master public keys with no risk to the master private key, you cannot do both at the same time.
These flaws only cause damage to your crypto holdings in rare vocations you don’t have to worry too much about using HD wallets.
Conclusion
HD wallets are the best option to save your crypto holding securely.
There are many HD wallet providers in the market that provide these wallet services.
Here I listed some HD wallet providers, in this list, some offer free service some are paid.
To see the list go to my site link below this post.
Now it is your turn to choose a wallet that is suitable for you, tell me which wallet you prefer in the comments.
If you have already used HD Wallet share your experience in the comments below.
And if you find this article informative? Do share with your family and friends.
Originally published at https://ccoingossip.com on September 17, 2019.
