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Common BIP's explained

Cole

• 1 min read

BIP stands for Bitcoin Improvement Proposal. This is the method bitcoin developers use to suggest improvements or upgrades to Bitcoin. Kind of like a blueprint for writing out a structured document that the community reviews, and if it’s useful and widely accepted, it becomes part of how Bitcoin tools and wallets are built.

Here is a list of the most common BIPs I encounter on my journey to master bitcoin, with a short explanation that is easy to understand. This is my personal document that I will share with the world, as others will probably find it useful too.

BIP44

Defines how wallets should organize and derive keys/addresses from a single seed phrase.

When HD wallets were introduced in BIP32, you could generate unlimited addresses from one seed. But there was no agreed-upon structure for how to generate these addresses.

If every wallet developer made their own rules, seeds wouldn’t be portable. BIP44 created a universal structure so the same seed phrase would generate the same accounts/addresses across different wallets.

BIP44 defines a 5-level derivation path:

m / purpose' / coin_type' / account' / change / address_index

Bip44 makes life easy because of Interoperability, and Organization across wallets.

BIP39

BIP39 defines the standard for bitcoin mnemonic seed phrases - 12 or 24 human-readable words you back up when you create a wallet.

Instead of writing down a long string of random numbers (the raw seed), BIP39 lets you use words from a fixed list, making backups easier and less error-prone.

How it works:

  1. Entropy (randomness) is generated. 128 bits of randomness for 12 words, 256 bits for 24 words.
  2. Checksum is added. A small piece of extra data (derived from a hash of the entropy) is appended to detect errors.
  3. Split into chunks. The entropy + checksum is split into 11-bit segments. Each 11-bit segment maps to one word from the BIP39 wordlist (2048 words).
  4. Mnemonic phrase is created (ex: abandon ability able about above absent absorb abstract absurd abuse access accident)

BIP39 also defines an optional passphrase, often called the “25th word.” The mnemonic + passphrase together generate the seed.

BIP32

To be added:

  • bip32 - Hierarchical Deterministic (HD) wallets, one seed → infinite keys and addresses in a tree structure.
  • BIP49, BIP84, BIP86 — Address type standards

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