Hierarchical deterministic wallets

This is the most advanced form of deterministic wallets. These were introduced in the BIP0032 of the Bitcoin Improvement Proposal system. These wallets follow a tree structure, that is, the seed creates a master key, which further creates child keys, and each of the keys can derive further grandchildren keys. Thus, in these types of wallets, there can be multiple branches of keys, and each key in the branch is capable of creating more keys as required. The following diagram shows the keys and the hierarchy of addresses created in such wallets: