So, the advantage of deterministic wallets is that you can recreate all private keys from the initial backup you created.
What's the advantage of having a hierarchy branching out from the master seed, instead of just one line of key pairs?
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Hierarchy allows interesting use-cases.
You could have a master company key
m/0' and give out
m/0'/0/0 to company-branch
m/0'/0/1 to company branch
You could then allow audits by handing out the extended public keys (xpub) of
m/0'/0 to some trust organization (or just hand out
m/0'/0/0 if you want someone to audit branch
Private key at
m/0' can reconstruct all funds from all branches.
On top of that, online-shop of branch
A could use the xpub of
m/0'/0/0/0 to received funds while not revealing the wallet structure of
Another interesting use-case would be to map domain-names or other string-based- identity-systems to the hierarchy. Example:
Github.com could result in
m/71'/105'/116'/104'/117'/98'/... (very unoptimized way for demonstration purpose).