Deterministic Wallets - Reading Assignment

Privacy Coins - Ultimate Course
#143

You can create a new address at any time you want, so your anonymity set is only limited by the number of addresses you use :slight_smile:

#144

  1. What’s the advantage of using a Deterministic Wallet, as opposed to generating many different keypairs?
    it’s enough one private key for all the addresses

  2. What advantage does a Type-2 wallet have over Type-1?
    it’s possible to generate addresses without private key

  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?)
    all bitcoin users addresses

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#145

Deterministic Wallets

  • What’s the advantage of using a Deterministic Wallet, as opposed to generating many different keypairs?
    • A deterministic wallet allows you to create as many addresses as you want, all with a single, primary creator key. Generating keypairs however takes significantly more time to jot down, store and keep track of. It also can be very expensive with fees - transferring BTC just to pay fees for a transaction, which requires a fee also.
  • What advantage does a deterministic Type-2 wallet have over deterministic Type-1?
    • Type 2 wallet makes it possible to store the master key separately but 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?)
    • A potentially infinite number, as new addresses can be generated with each tx and without backing up the new private key
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#146

I think in either case the fees are the same its just the way keys are generated is different. :slight_smile:

#147

I don’t understand :frowning:

#148

Deterministic wallets generate keys from the master key (a fancy name for the root private key) and a regular wallet generates the keys independently, that is why you must backup all the keys while in deterministic wallets you can only backup the master key.
So the only difference is how the keys are generated but doesn’t influence the transactions in any way thus the fees are the same in both cases. :slight_smile:

#149

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.

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(type,n) = Master_public_key + H(n|S|type)*point

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?)
Public addresses are changeable after every transaction.

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#150

1.- Deterministic wallet sort out the problem of having to generate a new addresses and backup every time. Uses a single master key.

2.- We can store in a security way master key of the wallet while generating public keys.

3.- The anonymity set is 1, the receiver can generate new addresses every time he receives a TX.

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#151

Actually its the number of all available addresses, which is quite a lot. In bip32 for each derivation path you have 2^32 available keys you can generate. :slight_smile:

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#152

Oki More clear now, thanks Alko :blush:

#153

  1. The advantage of a deterministic wallet is that all the future addresses are determined in advance, so it only needs backed up up once

  2. The advantage of Type-2 over Type-1 is that Type-2 secures the master private key separately and can still generate new addresses

  3. A new public address can be generated for each transaction so the anonymity set is huge

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#154

  1. What’s the advantage of using a Deterministic Wallet, as opposed to generating many different keypairs?
    A) It can only be backed up once and stays backed up forever. You do not need to store multiple private keys.

  2. What advantage does a Type-2 wallet have over Type-1?
    A) You can separately secure the private key, but still generate new addresses with the public key.

  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?)
    A) New public key generated every transaction.

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#155
  1. A wallet that you back up once, all future adrresses are determined in advance.
  2. You can seperately secure the private key.
  3. A new public key is generated on every transaction.
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#156

Easier backup of the wallet.

The ability to generate addresses without access to private keys.

The idea that every transaction has a unique address.

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#157

1 The deterministic wallet is generated by a hashing a seed phrase. The wallet can be used to generate child wallets in a deterministic way. Thus the seed phrase will be generating the same wallet and child wallets every time.
2 The type1 (above) uses the parent key to generate all child wallets and the type2 can use keys to child wallets to generate grandchild wallets (in eternity) and thus make it more difficult to trace back. (from impossible to damned impossible further to bloody damned impossible)
3 One seed phrase may be used to generate image wallets.
https://www.youtube.com/watch?v=2HrMlVr1QX8 at 6:11 if I get this correct.

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#158

It can generate 2^32 keys per derivation path. BIP32 and BIP44 define a standard derivation path that is 5 levels deep. On each level is a 32 bit integer that can be used for further branching.
Now since I know you’re a mathematician, I’ll leave the math to you to calculate all the possible addresses you can generate from it :smiley:

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#159

Ok, if I understand you, from the root I can generate n keys in five levels thus n^5 keys. If n=2^32 I will be able to generate (2^32)^5 =2^(32*5)=2^160 keys. as 2^10=1024 about 10^3 it is 10^16 keys or in normal decimal notation 10 000 000 000 000 000.

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#160

2^32 yes of course if numbers are 0…2^31 and 1+2^31…2^32 there are 2*2^31. My bad!!! :wink:
I must learn the difference between “and” & “or” :sunglasses:

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#161

Yes, thought theoretically you can go into any depth. But if you follow BIP32 only the final level actually represents the key. Each level has its own meaning described like this:

m / purpose' / coin_type' / account' / change / address_index

So here you have m as the master key, purpose is a constant that if you follow the standard is set to 44’ (the ' means its a hardened key so it starts with 1 in binary) or 0x8000002C. Then you have a coin type, account, change and index (these I hope are self explanatory).
So for example a derivation path m / 44' / 0' / 0' / 1 / 1 would let you know this is a Bitcoin address for the first account, its a change address and is the second one. :smiley:
Its actually kind of similar to a directory structure on a filesystem and I think its absolutely genius!

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#162

Ahh okay. So generating a new key for each transaction would be better, security wise, but it would take a much longer time to do so.

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