BIP-85 enables the creation of multiple independent wallets (child keys) from a single master seed, streamlining wallet management and enhancing security. Here are several practical scenarios where BIP-85 proves beneficial:
1. Onboarding friends and family
For individuals new to cryptocurrency, securely managing seed phrases can be daunting. With BIP-85, you can generate a child key for a friend or family member, allowing them to use a wallet derived from your master seed. This approach provides a safety net; if they lose their backup, you can assist in recovery. However, it's crucial to note that you will have access to their wallet, so this method is best used in trusted relationships.
2. Segregating funds for different purposes
Managing finances often involves allocating funds for various purposes, such as savings, daily expenses, or specific projects. BIP-85 allows you to create distinct wallets for each category, all derived from your master seed. This segregation enhances organization and security, as each wallet operates independently.
3. Creating hot wallets from a cold wallet
Hot wallets, used for frequent transactions, are more exposed to potential threats. By deriving a hot wallet from your secure cold wallet's master seed using BIP-85, you can manage daily transactions without compromising the security of your main funds. If the hot wallet is compromised, your master seed and other child wallets remain secure.
4. Organizational wallet management
Businesses can utilize BIP-85 to assign separate wallets to different departments or projects, all derived from a single master seed. This setup simplifies key management and ensures that if one wallet is compromised, the others remain unaffected.
5. Testing new wallets or applications
Developers and users experimenting with new wallet software can use BIP-85 to generate test wallets without the need for separate backups. If a test wallet is compromised or no longer needed, it can be discarded without affecting the master seed or other child wallets.
6. Generating secure passwords and keys
Beyond wallets, BIP-85 can derive entropy for creating secure passwords or cryptographic keys. This feature is useful for securing accounts or encrypting data, with the added benefit that all derived information can be regenerated from the master seed if needed.
By leveraging BIP-85, users can efficiently manage multiple wallets and secure information, all anchored to a single, well-protected master seed.