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e4xit committed Apr 29, 2014
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==Abstract==

This BIP defines logical hierarchy for deterministic wallets based on algorithm
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==

Hierarchy proposed in this paper is quite comprehensive. It allows to handle
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.

Expand All @@ -32,7 +32,7 @@ m / purpose' / coin_type' / account' / change / address_index

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

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

===Purpose===

Expand All @@ -50,7 +50,7 @@ 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
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
Expand All @@ -63,8 +63,8 @@ Hardened derivation is used at this level.
This level splits the key space into independent user identities,
so the wallet never mixes the coins across different accounts.

User can use these accounts to organize the funds in the same
fashion like bank accounts; for donation purposes (where all
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.

Expand All @@ -73,11 +73,11 @@ 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 previous account does not
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 algorithm is described in "Account discovery" chapter.
an external source. Such an algorithm is described in "Account discovery" chapter.

===Change===

Expand All @@ -104,15 +104,15 @@ 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 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 correct, because software should disallow creation of new
accounts if previous one has no transaction history as described in chapter
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 account with total 0 coins and the algorithm will
balances, so you can have an account with 0 total coins and the algorithm will
still continue with discovery.

===Address gap limit===
Expand All @@ -121,7 +121,7 @@ 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 user is trying to exceed the gap limit on
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==
Expand Down Expand Up @@ -251,7 +251,7 @@ All these constants are used as hardened derivation.
|m / 44' / 1' / 1' / 1 / 1
|}

==Compatible walets==
==Compatible wallets==

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