“HD wallet” – the technology behind cryptocurrency wallets

The crypto universe is an ever-evolving universe. This has led to it being a bit difficult for some to keep up with the turns.

As a crypto investor , you should have a crypto wallet, and this wallet is probably developed on HD wallet technology. This is a technology that can be used a little complicated, but if you take a closer look you will quickly see that this may not be the case anyway.

In this article, we will look at the technology – HD wallet technology – which most of today’s crypto wallets are based on.

HD wallet – the very concept

Are you one of those people who think that HD in HD wallet stands for High Definition, as it does in connection with the quality of photos, TV and the like? You’re probably not alone in that – but that does not mean it’s right. Instead, it is the opposite – wrong.

In the context of cryptocurrency, HD is not an abbreviation for High Definition. It is instead an abbreviation for the term “Hierarchical Deterministic”. But what does this mean in combination with a cryptocurrency wallet?

The word “hierarchical” refers to the fact that all cryptocurrency addresses are connected to each other in one way or another. You can trace back to each individual address using the wallet’s seed phrase. The seed phrase can be found in the core of the crypto wallet, but why exactly this phrase is important, we will return to a little further down in the article.

In the context of cryptocurrency, the word “deterministic” refers to a predictable system that leads to a particular outcome. In such a context, the beginning and the end will always be the same.

What is HD wallet technology?

To understand what HD wallet technology actually does, we have to compare it to a standard crypto wallet that is not based on this technology.

A standard crypto wallet consists only of a public key, as well as a private key that gives you access to the cryptocurrency you have invested in. But this solution is best suited for those who only invest in cryptocurrency for fun – and only in one type of cryptocurrency.

If you are a person who invests actively and tries your hand at different cryptocurrencies, then you are dependent on having a cryptocurrency wallet that supports this. Every new investment is a new transaction, and then a new public key and a new private key follow.

As a result, many players who develop cryptocurrency wallets have adopted HD wallet technology, because it means that their product supports active investment in cryptocurrency.

Therefore, the seed phrase is important in connection with HD wallet technology

In connection with HD wallet technology, the seed phrase is extremely important. This is because you need the seed phrase if you should be too unlucky to lose the private key. It is very important that you do not lose the private key, but if it should happen, you are dependent on the seed phrase to be able to have any hope of recovering the private key and thus access to your crypto wallet.