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What is derivation path and why I need it?

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Avatar for Telesfor
Written by   772
1 month ago

In my article about Bitcoin Cash wallet I wrote about the importance of the seed.

To know the seed is very important, but it is not enough. You still have to know the appropriate derivation path.

Derivation Path is a wallet organizer in the form of numbers.

The combination of seed and derivation path generates several addresses in one wallet. You can read a good article about it here.

Two main derivation paths are used in Bitcoin Cash wallets.

The old form, which also use Bitcoin BTC wallets:

m/44'/0'/0'

And the new form, Wich is used in Electron Cash by default:

m/44'/145'/0' 

Different wallets use different derivation paths, so you must always make sure that a correct derivation path is used when you enter your seed.

The Bitcoin.com wallet and the read.cash wallet use the old derivation path, and the atomic wallet uses the new derivation path. Which derivation paths are used is usually indicated on the websites of the wallets.

The best are wallets, like Electron Cash, where you can specify the derivation path when importing the seed.

If you want to check why derivation path is important, you can try electron cash, atomic wallet and read.cash wallet.

Install atomic wallet, write down the seed and perform some transactions. I did three transactions:

Then imported the seed, wich you used in the atomic wallet into electron cash. To do it install electron cash wallet, click on "New wallet"

Then choose "Restore from seed" and give the wallet name and a password

Now type your atomic wallet seed and use the default derivation path m/44'/145'/0'

Now you will see can your atomic wallet amount and transactions in electron cash wallet

Atomic wallet doesn't use change addresses, therefore uncheck the box in electron cash wallet.

Now you can use both wallets for the same address. Your amount and your transactions will be synchronized automatically in both wallets. Why you can use both wallets at the same time for one address, you can read in my article.

You can do the same if you use Exodus Wallet or Trust Wallet. Both wallets also use the derivation path m/44'/145'/0' .

You can do the same with your read cash wallet, but you have to use derivation path m/44'/0'/0' when you import the seed.

If you import the read.cadh seed into electron cash wallet, you will see all your read.cash transactions in electron cash wallet. If you unchecked the box "use change addresses" you can use electron cash wallet for your read.cash account.

You can do the same for Bitcoin.com wallet. Bitcoin.com wallet use change addresses, therefore you have to check the box "Use change addresses"

Now try to import a wallet with a not matching derivation path. You will notice that not a single transaction will be seen and the amount will always be 0.

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Avatar for Telesfor
Written by   772
1 month ago
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Comments

2.36$ vau

$ 0.00
2 weeks ago

Very useful information. Thank you for sharing! That's what all we need.

$ 0.00
1 month ago

It's "technical" things like this that hinder adoption to the general population. The UX needs to be easy for the end user and as less complicated as possible.

$ 0.00
1 month ago

This is background knowledge for those interested. You can do without. Install Bitcoin.com wallet and try it out. UX is excellent.

$ 0.00
1 month ago

Do we need to use this if for example, i have around 5 wallets connected in my bitcoin.com wallet, and i want to use all of it and transfer it to a new device. Will using the private key to import all at once my wallets isn't enough?

$ 0.00
1 month ago

If you have 5 different wallets in your bitcoin.com wallet, you have 5 different seeds. If you want to transfer your BCH to another wallet, you can create a new wallet with an new seed and send your whole BCH to another wallet. If you want to have access to your existing addresses on another device you have to import 5 seeds into your new device.

$ 0.00
1 month ago

I thought a private key can all do the work for it 😂. Thank you for the clarification sir.

$ 0.00
1 month ago

This is what i need to know. . i was curious about derivation path and the use of it. Thanks for this sir 😊

$ 0.00
1 month ago

I cant see that derivation path in Bitcoin.com I only see it on read cash wallet. Where can I find it on Bitcoin.com wallet sir?

$ 0.00
1 month ago

Bitcoin.com wallet in this version shows no derivation path. Bitcoin.com wallet uses m/44'/0'/0' as I described in my article.

You can see it also in the FAQ: https://support.bitcoin.com/en/articles/3568704-exporting-legacy-wallets-with-passwords

$ 0.00
1 month ago

I had to read it twice in order to let it sink to my head.✌I'm a novice and this adds information to little knowledge I have. Thanks.

$ 0.00
1 month ago

It is best to try it out as I have described it. Then you'll learn it.

$ 0.00
1 month ago

I'm trying to do it now...

$ 0.01
1 month ago

I'm gonna save it! Thanks for the complete information with step by step process and screenshots. I have never tried importing seed to another wallet since then.

I struggle to understand about wallets whatsoever, I even read your article about bch unfortunately, I have a poor understanding of that haha! But I still scrolling at coinbase, reading other articles there. I currently use a coinsph, all I know is to send and receive 🙂.

$ 0.00
1 month ago

Remember, seed and derivation path is very important. This is the access to your BCH. You can lose your smartphone, you can forget your password, but if you know your seed and derivation path, you can always access your BCH.

$ 0.00
1 month ago