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A deterministic wallet only requires to be backed up once. It remains backed up forever as all future addresses are pre-determined. Another advantage is that it requires less storage space and can be easily backed up to a hard paper copy.
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A Type 2 wallet means you can generate new addresses without revealing the private key.
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New public addresses are changed after every transaction.
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- Deterministic wallet can be backed up offline and any copy is as good as any other no matter how old.
- The advantage of the type-2 is that you can separately secure the Master_private_key, but still generate new addresses with Publickey(type,n) = Master_public_key + H(n|S|type)*point
- Public addresses are changeable after every transaction
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A deterministic wallet has the advantage of generating multiple keys and backed up with a seed.
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A type 2 wallets advantage is that it requires less storage
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new public addresses can be created/used so it would be impossible to try and link one of the many unknown Bitcoin addresses to Bob
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- Its a wallet that you can back up once forever, its smaller and requires much less techincal expertise.
2)Type 2 is much easier to manage with a seed phrase.
3)It can be limitless
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What’s the advantage of using a Deterministic Wallet, as opposed to generating many different keypairs?
It’s a wallet which you can backup once and it stays backed up forever because all future addresses are determined in advance.
It has a very small size.
What advantage does a Type-2 wallet have over Type-1?
The advantage of the type-2 is that you can separately secure the master private key and still generate new addresses.
What is the anonymity set for a receiver using a Deterministic Wallet? (hint: to someone who knows another of Bob’s addresses, how many other unknown addresses on the blockchain might be Bob’s?)
As the addresses are only ever used once and generated for every transaction, then the anonymity set is all other unknown addresses.
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1. What’s the advantage of using a Deterministic Wallet, as opposed to generating many different keypairs?
On a Deterministic Wallet encryption is set forever once it is encrypted once as all future addresses are determined in advance.
2. What advantage does a Type-2 wallet have over Type-1?
The Master Private Key is securely stored so new addresses (public keys) can safely be generated even when private key encryption is in place.
3. What is the anonymity set for a receiver using a Deterministic Wallet? (hint: to someone who knows another of Bob’s addresses, how many other unknown addresses on the blockchain might be Bob’s?)
The receiver can change her/his address for each transaction but when they make a transaction all the receiving inputs can be linked to the same user.
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What’s the advantage of using a Deterministic Wallet, as opposed to generating many different keypairs? A Deterministic Wallet only has to be backed-up once since all its future addresses are determined ahead of time.
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What advantage does a Type-2 wallet have over Type-1? You can secure the private key separately and generate new public keys from it.
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What is the anonymity set for a receiver using a Deterministic Wallet? (hint: to someone who knows another of Bob’s addresses, how many other unknown addresses on the blockchain might be Bob’s?) The anonymity set using a Deterministic Wallet is that each transaction has a new public address.
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1.) The advantage of using a deterministic wallet as opposed to generating many different key pairs is that it only needs to be backed up once and can be stripped down to a very small size. With deterministic wallets, all future addresses are determined in advance.
2.) The advantage of a Type-2 wallet over Type-1 is that you can separately secure the private key and still generate new public key addresses.
3.) The anonymity set for a receiver using a deterministic wallet is all of the confidential senders/receivers of the blockchain. A new public key is generated with every transaction that is carried out.
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1. What’s the advantage of using a Deterministic Wallet, as opposed to generating many different keypairs?
It’s a wallet which you can backup once and it stays backed up forever because all future addresses are determined in advance. Wallet generates new addresses if we want for sends and get money and because of that nobody knows where is money going.
2. What advantage does a Type-2 wallet have over Type-1?
the advantage of the type-2 is that you can separately secure the Master_private_key, but still generate new addresses with
Publickey
3. What is the anonymity set for a receiver using a Deterministic Wallet? (hint: to someone who knows another of Bob’s addresses, how many other unknown addresses on the blockchain might be Bob’s?)
Bob can generate as many addresses as he likes.
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What’s the advantage of using a Deterministic Wallet, as opposed to generating many different keypairs? : A Deterministic Wallet is backed up once forever generating/determining future addresses in advance.
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What advantage does a Type-2 wallet have over Type-1? : Type 1 generates multiple addresses stemming from “Deter. Wallet”… Vs…Type 2 generates addresses stemming from a private key = a public key.
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What is the anonymity set for a receiver using a Deterministic Wallet? (hint: to someone who knows another of Bob’s addresses, how many other unknown addresses on the blockchain might be Bob’s?) : The anonymity set is the random address generated / used by Bob for a completely different TX, regardless of the previous TX’s by Bob. The addresses do not correlate.
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The advantage of using a Deterministic Wallet is that it is backed up once and it stays backed up forever as all future addresses are determined in advance.
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You can separately secure the Master_private_key, but still generate new addresses
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The anonymity set is all other unknown addresses as the address is changed after every transaction.
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What’s the advantage of using a Deterministic Wallet, as opposed to generating many different keypairs?
The main benefit of using a deterministic wallet is that once it is backed up, it is backed up indefinitely because you may determine all future wallets based off it.
You would be able to secure the private key - but still be able to generate new public keys with public_address = Master_public_key + H(n|S|type)*point
What advantage does a Type-2 wallet have over Type-1?
A Type-2 wallet is more secure than Type-1 because if an attacker were to gain access to someone’s public key, and secret - they still would not have access to the funds because they would still require the private keys.
What is the anonymity set for a receiver using a Deterministic Wallet? (hint: to someone who knows another of Bob’s addresses, how many other unknown addresses on the blockchain might be Bob’s?)
For a deterministic wallet, the anonymity set is still one, however the one private key would be able to generate new addresses whenever needed. But since when he spends funds, it would be possible to link it to another public key transaction.
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A wallet with future addresses remaining to create, with a backup in stone.
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Allows to secure master key
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public keys can be changed after transactions
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Easier to back up the wallet
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Able to create addresses without access to private key.
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Each transaction have a unique address
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- wallet can be backed up once and it stays backed up forever because all future addresses are determined in advance. It can also be stripped down to a very small size which could be easily backed up on paper (e.g. with a QR code)
- we can separately secure the private key (master), but still generate new addresses
- too many to figure that out:P
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Before the introduction of deterministic wallets,there would be a single private-public key pairs associated with a single address, requiring the user to handle multiple backups for each new address.A HDwallet have a tree-like structure originated with a master (parent) private key associated with a pubkey, from which an enormous ammount of private-public key pairs (childs) could generate, each one, multiple addresses each; all of this being able to be backed-up by a master seed, improving the management of cryptographic keys from security, anonimity and organizational aspects, along with user experience.
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Ok, at the point of the assignment, I understood that forType-1 wallet the Privatekey(type,n) = H(n|S|type), while Type-2 wallet Privatekey(type,n) = Master_private_key + H(n|S|type), so it separates the master private key from the rest of the equation, making all new branches of addresses related - and able to be backed-up all at once - by it, while adding an extra layer of security by making it harder that sensitive information such as the private keys could be revealed or discovered by an attacker.
—> AFTER watching the ‘HD Wallets’ topic from the course, I got that type 2 are the Heirarchical Deterministic Wallets as implemented nowadays, with the extended public key idea, with the merkle-tree structure. Differently from the type-1 that derives independent public keys from each private key+index/interger/random number, this type 2 gives a deterministic path from which a master public key - derived from a master private key- can be mixed with those indexes/random numbers to generate multiple private-public key pars, each generating addresses that are apparently independent, but are all derived from the same origin (the master keys), making all the funds received in any of them spendable and backed-up with the master private key.
A great video that helped me understand the impact of this standart for non-custodial e-commerce use case that may help others too: presentation @MIT Bitcoin Club YT Channel named HOW HIERARCHICAL DETERMINISTIC WALLETS ELIMINATE THE MIDDLE MAN FOR MERCHANTS
If anyone more well-versed in cryptography can correct/complement ELI5ish style, I appreaciate. I keep trying to understand better and deeper the cryptographic fundamentals that are key to grasp not from a cryptographer level but more well versed as a developer, user and crypto, digital security and privacy enthusiast.
- In short, assuming the user generates a new address for each new transaction, the anonymity set would be all the non-personally-identifiable addresses of a blockchain. If it’s a utxo model blockchain such as btc, we would need to consider how the utxo’s are spent to construct a new output with the input, because if an outside observer could link one tx with another, such as with very unique values (~denominators), it could lower the anonimity set.
But wouldn’t be more accuarate to say there’s no ideal straight-forward answer because the anonimity set is different if you consider a utxo or account model blockchain, if it’s a non-custodial or centralized custodial wallet generating the key pairs and addresses, among other user interactions with kyc’d flow of money on and offramp…? @ Grant_Hawkins
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- Simplicity: Deterministic wallets use a single seed phrase to generate all of the addresses, making it easier to manage and backup the wallet.
Security: Because deterministic wallets use a different address for each transaction, it is less likely that an attacker will be able to compromise multiple transactions by compromising a single private key.
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A Type-2 deterministic wallet is a type of deterministic wallet that uses a different set of keys for each address, which increases the security and anonymity of the wallet. In a Type-1 deterministic wallet, all of the addresses are derived from a single set of keys, which means that an attacker who compromise a single private key could potentially compromise all of the addresses in the wallet.
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The anonymity set for a receiver using a deterministic wallet is the number of other addresses on the blockchain that could potentially belong to the same user. For example, if someone knows one of Bob’s addresses and Bob is using a deterministic wallet, the anonymity set for Bob would be the number of other addresses that have been generated by the same seed phrase. If Bob has used the deterministic wallet to generate many addresses, the anonymity set could be quite large, making it more difficult for an attacker to track Bob’s activities on the blockchain.
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What’s the advantage of using a Deterministic Wallet, as opposed to generating many different keypairs?
A deterministic wallet can be backup once and it stays backed up forever because all future addresses are determined in advance. -
What advantage does a Type-2 wallet have over Type-1?
The advantage of the type-2 is that you can separately secure the Master_private_key, but still generate new addresses with Publickey. -
What is the anonymity set for a receiver using a Deterministic Wallet? (hint: to someone who knows another of Bob’s addresses, how many other unknown addresses on the blockchain might be Bob’s?)
The anonymity set is unknown as there are many addresses for each transaction.
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Is the concept of hierarchical deterministic wallet explained in one of the courses?
What’s the advantage of using a Deterministic Wallet, as opposed to generating many different keypairs?
All future addresses are determined in advanced. A Deterministic Wallet can be stripped down to a very samll size and be backed up very easily. As opposed to non-deterministic which would require you to back up every 100 addresses or sends and is not easily stored.
What advantage does a Type-2 wallet have over Type-1?
Publickey(type,n) = Master_public_key + H(n|S|type)*point
Type-2 wallet separately stores the Master private key and generates new addressess.
The advantage is someone could hack the server and get all past and future addresses but could not access any of the money sent to the addresses because there is no access to the private keys.
What is the anonymity set for a receiver using a Deterministic Wallet? (hint: to someone who knows another of Bob’s addresses, how many other unknown addresses on the blockchain might be Bob’s?)
There is only 1 receiver in the Deterministic Wallet, but that receiver may change to other addresses.