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doc: Are XPubs generated at Depth 3 or Depth 4? #30

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coolaj86 opened this issue Jul 7, 2023 · 0 comments

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coolaj86 commented Jul 7, 2023

Many Wallets generate XPubs at Depth 3. This is kinda correct. They are intended for the audit use case (https://en.bitcoin.it/wiki/BIP_0032#Audits:_N.28m.2F.2A.29), not the sharing use case (https://en.bitcoin.it/wiki/BIP_0032#Per-office_balances:_m.2FiH).

Depth 3 is for internal Account Auditing (captures received money and returned change)
Depth 4 is for Sharing with Contacts (captures received money only)

This library refers to XPubs as level-4 because it is intended to be used with Contacts, not for internal auditing.

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