What a derivation path is, explained with a wardrobe

The wardrobe

Your recovery phrase is an enormous wardrobe with millions of drawers. Each drawer is an address, with its own key. The derivation path is simply the instruction for which door to open, which shelf to look at and which drawer to pull out: «second corridor, third shelf, first drawer».

The slash-separated numbers are exactly that: corridor, shelf, drawer. And since the wardrobe is the same, getting the directions wrong lands you in front of a perfectly real and perfectly empty drawer.

Why this exists

• So one phrase covers all your coins and all your accounts, with nothing else to write down.
• So you can keep separate accounts — savings, spending, a project — with the same backup.
• So each payment you receive goes to a fresh address, which is better for your privacy.
• So the wallet can keep creating addresses forever without you doing anything.

Why it causes you problems

Because each app has its own habit about which directions to use by default. If you created the wallet in one app and restore it in another, the second may be looking down a different corridor of the same wardrobe. Your phrase is correct, your money is where it was, but the screen says zero.

What you actually need to know

1. You don’t need to understand the numbers. You need to know which app created the wallet: that determines the path.
2. If you don’t remember, adding accounts one by one in the new app solves most cases and carries no risk.
3. If you use Bitcoin, try the different address types too: another variant of the same problem.
4. If you have one of your old addresses, say so: with it, the right drawer is found immediately.

Keep reading

• The phrase works but I can’t see my funds: derivation, made easy
• I have the phrase but the wallet shows empty: the 5 most common causes
• xprv, ypub, zpub: what those long keys are, in plain English
• Can I have two wallets with the same phrase? Yes, and why it confuses you