Derivation path is the slash-separated string that tells a wallet where in the BIP-32 hierarchical key tree to look for a specific address. The classic example, m/44'/0'/0'/0/0, means: from the master seed, take the BIP-44-purpose branch, then the Bitcoin coin branch, then the first account, then the receive chain, then the first address. Every modern wallet uses derivation paths under the hood; most hide them from the UI.

Why holders care about paths

The path is the only thing that determines which addresses your mnemonic surfaces. Same mnemonic plus different path equals different addresses — and possibly hidden balances. The most common real-world failure mode for a US-resident holder migrating between wallets is exactly this: import the seed into a new wallet, see a $0 balance, and panic. In nearly every case, the balance is sitting at addresses derived under a different path, recoverable as soon as the right path is selected.

The paths that matter in 2026

For Bitcoin:

  • m/44'/0'/0'/0/x — legacy P2PKH (addresses starting with "1")
  • m/49'/0'/0'/0/x — P2SH-wrapped SegWit (addresses starting with "3")
  • m/84'/0'/0'/0/x — native SegWit bech32 (addresses starting with "bc1q")
  • m/86'/0'/0'/0/x — Taproot (addresses starting with "bc1p")

For Ethereum and EVM chains:

  • m/44'/60'/0'/0/x — Ledger Live default
  • m/44'/60'/0'/x — MetaMask default (one level shorter)

This Ledger-vs-MetaMask difference is the single biggest source of cross-wallet confusion for ETH holders.

Hardened vs non-hardened

The apostrophe (or "h") on a path segment marks "hardened derivation," meaning the child key cannot be derived from the parent's public key alone — the parent's private key is required. Hardened derivation is what protects you from a compromised xpub leaking child private keys upward. Standard derivation paths use hardened derivation for the purpose, coin_type, and account levels; non-hardened from the change level downward.

Practical advice

Two operational habits worth building:

First, record the derivation path next to the wallet name in your seed-backup notes. "Ledger Nano S — m/44'/0'/0'/0/x — native SegWit" is the kind of note that saves you in year five when you've forgotten exactly how you set things up. Keep this note physically with — but not directly attached to — the seed-phrase backup.

Second, when restoring on a new device, try the standard path first. If the expected balance does not appear, try the wallet's documented alternatives before assuming the worst. Sparrow Wallet has an excellent "Show in" feature that scans multiple paths automatically.

Further reading: BIP-32, BIP-44, Hardware wallet.