xPub Key
What Is an xPub Key?
XPub, short for extended public key, is the master public key to your cryptocurrency account. It’s the public key used to derive child public keys as part of a Hierarchical Deterministic (HD) wallet. It is also known as the parent public key.
Simply put, the parent public key generates all the public addresses linked to your crypto account. It consists of the prefix “xpub” and is succeeded by a string of letters and numbers.
Pieter Wuille introduced this Bitcoin standard as a part of Bitcoin Improvement Proposal – 32 (BIP-32) to improve on-chain privacy. This special key allows users to utilize different receiving addresses for every transaction rather than reusing one, which helps preserve the recipient’s privacy.
How Does It Work?
While reusing public keys can impact the sender’s and recipient’s privacy, using different addresses for every transaction has several setbacks. For instance, tracking and maintaining a record of each address that belongs to you becomes a burden. Sharing these addresses with others for transactions without disclosing too much personal information is also a challenge. This is where xpub comes in.
BIP-32 introduced a master key pair that consists of an extended private key (xPriv) and an extended public key (xPub). The xPriv key – the master private key – pseudorandomly generates child private keys while the parent public key creates matching child public keys.
The master public key displays all the public addresses generated in the account. It can also generate more addresses without involving the private keys. This allows you to receive separate payments to different addresses, thereby minimizing the risk of exposing your full account balance. This also prevents potential tracking due to address reuse.
That said, receiving funds directly to your hardware wallet via your extended public keys is not necessarily a risk. This is because, even with your xpub online, your private keys are always held offline. However, while your funds remain safe even when the parent public key is exposed, anyone with access to it can track your entire transaction balance and history. As such, it is not recommended to share it with third parties.
