user5406: So, the advantage of deterministic wallets is that you can recreate all private keys from the initial backup you created.
What's the advantage of having a hierarchy branching out from the master seed, instead of just one line of key pairs?

user3697: Hierarchy allows interesting use-cases.
You could have a master company key m/0' and give out m/0'/0/0 to company-branch A and m/0'/0/1 to company branch B, etc.
You could then allow audits by handing out the extended public keys (xpub) of m/0'/0 to some trust organization (or just hand out m/0'/0/0 if you want someone to audit branch A only).
Private key at m/0' can reconstruct all funds from all branches.
On top of that, online-shop of branch A could use the xpub of m/0'/0/0/0 to received funds while not revealing the wallet structure of m/0'/0/0, etc.
Another interesting use-case would be to map domain-names or other string-based- identity-systems to the hierarchy. Example: Github.com could result in m/71'/105'/116'/104'/117'/98'/... (very unoptimized way for demonstration purpose).

5406: <p>So, the advantage of deterministic wallets is that you can recreate all private keys from the initial backup you created.</p>

<p>What's the advantage of having a hierarchy branching out from the master seed, instead of just one line of key pairs?</p>
 3697: <p>Hierarchy allows interesting use-cases.</p>

<p>You could have a master company key <code>m/0'</code> and give out <code>m/0'/0/0</code> to company-branch <code>A</code> and <code>m/0'/0/1</code> to company branch <code>B</code>, etc.</p>

<p>You could then allow audits by handing out the extended public keys (xpub) of <code>m/0'/0</code> to some trust organization (or just hand out <code>m/0'/0/0</code> if you want someone to audit branch <code>A</code> only).
Private key at <code>m/0'</code> can reconstruct all funds from all branches.</p>

<p>On top of that, online-shop of branch <code>A</code> could use the xpub of <code>m/0'/0/0/0</code> to received funds while not revealing the wallet structure of <code>m/0'/0/0</code>, etc.</p>

<p>Another interesting use-case would be to map domain-names or other string-based- identity-systems to the hierarchy. Example: <code>Github.com</code> could result in <code>m/71'/105'/116'/104'/117'/98'/...</code> (very unoptimized way for demonstration purpose).</p>
