Bitcoin wallets used to be a lot more complicated than they are today. Early bitcoin users had to back up every individual private key they used, in their raw form. This was tedious, error-prone and physical backups took forever. However, two key Bitcoin Improvement Proposals (BIP) drastically improved bitcoin wallets to make them what they are today.
- Just a Bunch of Keys
- BIP32: One Backup to Rule them All
- BIP39: Simplifying Wallet Backups with Seed Phrases
- Secure your Bitcoin with Metal
- Conclusion
Let’s break down how BIP32 and BIP39 made modern wallets what they are today.
Just a Bunch of Keys
Early bitcoin wallets were known as “Just a Bunch of Keys,” – and that is exactly what they were. A series of unrelated private keys.
Every time you created a new address for receiving Bitcoin, your wallet generated a new private key for that address. This meant that to ensure you had access to all your Bitcoin, you had to back up each individual private key.
Imagine you have a wallet with 5 transactions and 5 key pairs, your wallet backup may look like this:
KwotHwdFH8gJSRNDYD3EHdHWDXzjoKBWn2M4QiwWMKr8j6Srcukg
KxKbGredjoqPsedXUZaVorhYQwYbownNvDmbWqhB1h8MGtUdzac6
L4tH2dQcfCQGV5L8e9m1kXhVsgMEHymWsfUYZBpfYTZeuswBXaCt
KxDYtDwPCsGdhKXC3G4U3aSqkgdcvNcihygfFkhLXpv7JoV44cBY
L5DP95VpkH8QZhKhXqkKLetUcgzj8AmsGJQxJqGikXNARivs5a2V
Backing this up is no simple task, and 1 small mistake can result in huge losses.
BIP32: One Backup to Rule them All
Introduced in 2012, BIP32 proposed a new type of wallet structure known as a Hierarchical Deterministic (HD) wallet. These types of wallets can generate an entire “tree” of private keys, meaning that backing up only the master key can secure your entire wallet.
This solved the key issue with “Just a Bunch of Keys” wallets. Instead of backing up individual private keys, you only need to backup 1 master key to rule them all!
BIP39: Simplifying Wallet Backups with Seed Phrases
While BIP32 introduced HD wallets and master seeds, the master seed itself was still difficult to record and secure. BIP39, introduced in 2013, tackled this by replacing complex keys with a human-readable seed phrase.
BIP39 seed phrases are typically a set of 12 or 24 random words, chosen from a specific list. These words can be written down easily, reducing the chance of errors during backup.
The seed phrase acts as your master key. To backup your entire bitcoin wallet, all you need is a set of 12 or 24 human readable words.
Backing Up your Seed Phrase is Essential
The Seed Phrase backs up all the individual keys you need to access your bitcoin. Therefore, backing up your seed phrase is essential for securing your entire bitcoin stack.
Losing your hardware wallet, computer, or phone means you may permanently lose your bitcoin. A backup of your seed phrase will allow you to restore all funds in this case.
Most people start by backing their seed phrase up on paper. While paper backups can work, they are very easily damaged. Why would you secure your digital wealth on something as fragile as paper?
Secure your Bitcoin with Metal
Metal backups provide a secure, long-lasting solution for your seed phrase. Unlike paper, metal is resistant to fire, water, and decay, making it ideal for protecting your backup against accidents and natural disasters. A quality metal backup ensures your Bitcoin remains safe, even in extreme conditions.
Conclusion
Bitcoin wallets weren’t always this simple. Bitcoin users had to back up long and complex private keys every single time they received bitcoin to a new address. Key improvements, BIP32 and BIP39 allow users to back up only 1 set of human readable words to backup all their bitcoin. To ensure your entire bitcoin wallet is secure, all you need to do is secure a seed phrase. Metal backups are usually the recommended way to guard your seed phrase against many life hazards such as fire, flood, corrosion, and more—protecting your bitcoin holdings for many generations to come.
