The document discusses the key functions and structures of Bitcoin wallets, including the management of public and private keys, unspent transaction outputs (UTXOs), and transaction structures. It emphasizes the distinction between different types of wallets, particularly deterministic and hierarchical deterministic wallets, detailing the standards BIP-32, BIP-43, and BIP-44 to facilitate multi-currency support. Additionally, it highlights best practices for wallet security, such as using mnemonic codes and HD wallets.

1. Bitcoin Wallet & Keys
Sun Sagong @ Microsoft - Singapore
Blockchain&DAPPs Technology meetup
(11Apr2018)

2. Key Roles of Bitcoin Wallet
• 1. Manage Public & Private Key pairs and
addresses that are necessary to make payments.
• 2. Manage UTXO amounts in the Bitcoin network
and check transaction histories.

3. Private Key => Public Key => Bitcoin Address
• Private Key is the the root of user control over
all funds associated with the corresponding
bitcoin address.

4. Private Key => Public Key
ECDSA
Elliptic Curve
(Secp256k1 )

5. Public Key => Bitcoin Address

6. UTXO - Unspent Transaction Output
• UTXO will be spent as an input in a new transaction.
Transaction 1 (TXID)
OUTPUT
(UTXO)
● Sequence Number
● Amount of Bitcoins
● ScriptPubkey
(locking script)
INPUT
Transaction 2 (TXID)
OUTPUT
(UTXO)
INPUT
● TXID of UTXO
● Sequence Number
● ScriptSig (unlocking
script)
Structure of a transaction (non-coinbase)

7. Previously Used Wallet Structures
Type-0 nondeterministic (random) wallet
A collection of randomly generated keys
Type-1 deterministic (seeded) wallet
A deterministic sequence of keys derived from a seed

8. Hierarchical Deterministic Wallet - BIP32
Type-2 HD wallet
A tree of keys generated from a single seed
Password
Salt
PBKDF2(HMAC-SHA512, Password, Salt, 2048, 512)
HMAC-SHA512
512-bits
From mnemonic to seed

9. Creating Master Keys and Chain Code
Type-2 HD wallet
A tree of keys generated from a single seed
HMAC-SHA512
512-bits
256-bits

10. Private Child Key Derivation
Type-2 HD wallet
A tree of keys generated from a single seed
512-bits
256-bits
HMAC-SHA512
256-bits

11. Multipurpose HD Wallet Structure - BIP43 & 44
BIP-43 & 44 specifies the structure as consisting of five predefined tree levels:
• m / purpose' / coin_type' / account' / change / address_index
1. The first-level "purpose" is always set to 44'. - BIP 43
2. The second-level "coin_type" specifies the type of cryptocurrency coin,
allowing for multicurrency HD wallets where each currency has its own
subtree under the second level. - BIP 44

12. Wallet Best Practices
● Mnemonic code words, based on BIP-39
● HD wallets, based on BIP-32
● Multipurpose HD wallet structure, based on BIP-43
● Multicurrency and multiaccount wallets, based on BIP-44
Mastering Bitcoin 2nd Edition - Chapter 5: Wallets
https://github.com/bitcoinbook/bitcoinbook/blob/develop/ch05.asciidoc

13. Demo - Mnemonic Code Converter
Mnemonic Code Converter
https://iancoleman.io/bip39/