Derivation Path
A derivation path is the hierarchical route used to generate specific keys from a master seed in an HD wallet. It follows a standardized notation like m/84'/0'/0'/0/0 that determines which branch of the key tree produces each address.
How It Works
An HD wallet generates a tree of keys from a single seed. The derivation path specifies exactly which branch to follow. The standard notation uses forward slashes to separate levels: m/84'/0'/0'/0/0. Here, 'm' is the master key, 84' indicates BIP84 (native SegWit), the first 0' is for Bitcoin mainnet, the second 0' is the account number, 0 is for receiving addresses (1 for change), and the final 0 is the address index.
The apostrophe (') denotes hardened derivation, which means the child key cannot be used to compute the parent key. This is a critical security feature — even if a child key is compromised, the parent and sibling keys remain safe. The first three levels typically use hardened derivation, while the last two are unhardened to enable watch-only wallets with xpubs.
Different address formats use different derivation paths: BIP44 (m/44'/0'/0') for legacy addresses, BIP49 (m/49'/0'/0') for wrapped SegWit, BIP84 (m/84'/0'/0') for native SegWit, and BIP86 (m/86'/0'/0') for Taproot. When recovering a wallet, you must use the same path that was originally used, or you will derive completely different addresses and your funds will not appear.
Key Points
- Hierarchical notation specifying the exact branch of the key tree to follow
- Different address types (legacy, SegWit, Taproot) use different standard paths
- Hardened derivation (') prevents child key compromise from exposing parent keys
- Must be recorded alongside the seed phrase for reliable wallet recovery
- Standard paths (BIP44/49/84/86) ensure interoperability across wallet software