bitcoinbook/selected BIPs/bip-0044.mediawiki

<pre>
  BIP:     BIP-0044
  Title:   Multi-Account Hierarchy for Deterministic Wallets
  Authors: Marek Palatinus <slush@satoshilabs.com>
           Pavol Rusnak <stick@satoshilabs.com>
  Status:  Draft
  Type:    Standards Track
  Created: 2014-04-24
</pre>

==Abstract==

This BIP defines a logical hierarchy for deterministic wallets based on an algorithm
described in BIP-0032 (BIP32 from now on) and purpose scheme described in
BIP-0043 (BIP43 from now on).

This BIP is a particular application of BIP43.

==Motivation==

The hierarchy proposed in this paper is quite comprehensive. It allows the handling of
multiple coins, multiple accounts, external and internal chains per account and
millions of addresses per chain.

==Path levels==

We define the following 5 levels in BIP32 path:

<pre>
m / purpose' / coin_type' / account' / change / address_index
</pre>

Apostrophe in the path indicates that BIP32 hardened derivation is used.

Each level has a special meaning, described in the chapters below.

===Purpose===

Purpose is a constant set to 44' (or 0x8000002C) following the BIP43 recommendation.
It indicates that the subtree of this node is used according to this specification.

Hardened derivation is used at this level.

===Coin type===

One master node (seed) can be used for unlimited number of independent
cryptocoins such as Bitcoin, Litecoin or Namecoin. However, sharing the same
space for various cryptocoins has some disadvantages.

This level creates a separate subtree for every cryptocoin, avoiding
reusing addresses across cryptocoins and improving privacy issues.

Coin type is a constant, set for each cryptocoin. Cryptocoin developers may ask
for registering unused number for their project.

The list of already allocated coin types is in the chapter
"Registered coin types" below.

Hardened derivation is used at this level.

===Account===

This level splits the key space into independent user identities,
so the wallet never mixes the coins across different accounts.

Users can use these accounts to organize the funds in the same
fashion as bank accounts; for donation purposes (where all
addresses are considered public), for saving purposes,
for common expenses etc.

Accounts are numbered from index 0 in sequentially increasing manner.
This number is used as child index in BIP32 derivation.

Hardened derivation is used at this level.

Software should prevent a creation of an account if a previous account does not
have a transaction history (meaning none of its addresses have been used before).

Software needs to discover all used accounts after importing the seed from
an external source. Such an algorithm is described in "Account discovery" chapter.

===Change===

Constant 0 is used for external chain and constant 1 for internal chain (also
known as change addresses). External chain is used for addresses that are meant
to be visible outside of the wallet (e.g. for receiving payments). Internal
chain is used for addresses which are not meant to be visible outside of the
wallet and is used for return transaction change.

Public derivation is used at this level.

===Index===

Addresses are numbered from index 0 in sequentially increasing manner.
This number is used as child index in BIP32 derivation.

Public derivation is used at this level.

==Account discovery==

When the master seed is imported from an external source the software should
start to discover the accounts in the following manner:

# derive the first account's node (index = 0)
# derive the external chain node of this account
# scan addresses of the external chain; respect the gap limit described below
# if no transactions are found on the external chain, stop discovery
# if there are some transactions, increase the account index and go to step 1

This algorithm is successful because software should disallow creation of new
accounts if previous one has no transaction history, as described in chapter
"Account" above.

Please note that the algorithm works with the transaction history, not account
balances, so you can have an account with 0 total coins and the algorithm will
still continue with discovery.

===Address gap limit===

Address gap limit is currently set to 20. If the software hits 20 unused
addresses in a row, it expects there are no used addresses beyond this point
and stops searching the address chain.

Wallet software should warn when the user is trying to exceed the gap limit on
an external chain by generating a new address.

==Registered coin types==

These are the registered coin types for usage in level 2 of BIP44 described in
chapter "Coin type" above.

All these constants are used as hardened derivation.

{|
!index
!hexa
!coin
|-
|0
|0x80000000
|Bitcoin
|-
|1
|0x80000001
|Bitcoin Testnet
|}

==Examples==

{|
!coin
!account
!chain
!address
!path
|-
|Bitcoin
|first
|external
|first
|m / 44' / 0' / 0' / 0 / 0
|-
|Bitcoin
|first
|external
|second
|m / 44' / 0' / 0' / 0 / 1
|-
|Bitcoin
|first
|change
|first
|m / 44' / 0' / 0' / 1 / 0
|-
|Bitcoin
|first
|change
|second
|m / 44' / 0' / 0' / 1 / 1
|-
|Bitcoin
|second
|external
|first
|m / 44' / 0' / 1' / 0 / 0
|-
|Bitcoin
|second
|external
|second
|m / 44' / 0' / 1' / 0 / 1
|-
|Bitcoin
|second
|change
|first
|m / 44' / 0' / 1' / 1 / 0
|-
|Bitcoin
|second
|change
|second
|m / 44' / 0' / 1' / 1 / 1
|-
|Bitcoin Testnet
|first
|external
|first
|m / 44' / 1' / 0' / 0 / 0
|-
|Bitcoin Testnet
|first
|external
|second
|m / 44' / 1' / 0' / 0 / 1
|-
|Bitcoin Testnet
|first
|change
|first
|m / 44' / 1' / 0' / 1 / 0
|-
|Bitcoin Testnet
|first
|change
|second
|m / 44' / 1' / 0' / 1 / 1
|-
|Bitcoin Testnet
|second
|external
|first
|m / 44' / 1' / 1' / 0 / 0
|-
|Bitcoin Testnet
|second
|external
|second
|m / 44' / 1' / 1' / 0 / 1
|-
|Bitcoin Testnet
|second
|change
|first
|m / 44' / 1' / 1' / 1 / 0
|-
|Bitcoin Testnet
|second
|change
|second
|m / 44' / 1' / 1' / 1 / 1
|}

==Compatible wallets==

* [[https://mytrezor.com|myTREZOR web wallet]] ([[https://github.com/trezor/webwallet|source]])

==Reference==

* [[bip-0032.mediawiki|BIP32 - Hierarchical Deterministic Wallets]]
* [[bip-0043.mediawiki|BIP43 - Purpose Field for Deterministic Wallets]]