Quote from: BurtW on May 11, 2016, 11:42:25 PM

For maximum security, maximum privacy and maximum long term fungibility of the Bitcoin system every Bitcoin address should be used exactly twice: once when the address gets funded from another address or addresses and the second time when all the coins at that address get spent.

A good deterministic wallet does just that automatically. Every time you want to make a new deposit into your wallet the wallet will give you a new Bitcoin address. Every time you spend money from your wallet the wallet will automatically select one or more of your currently funded addresses to make up the amount you want to send. Any change due back to your wallet will go to a brand new address.

Do not worry about the inner workings so much. It is this use of each address only once that we want. Could other wallets be used that do this same thing? Could you ensure that you use other wallets in this way? Sure. But with a good deterministic wallet this is the default behavior.

With a deterministic wallet you need to only keep track of one thing: The 24 code words that encode the initial seed to the system. That is it. You keep those 24 words safe and private and you are good to go. No other backups are ever necessary. You do not need to remember to backup your wallet periodically, you do not have to worry about loss or destruction of the media used to back up the wallet (USB stick as an example). Also you do not have to worry that when you go to read back your USB stick it has become unreadable because of electron migration over time.

24 words, redundantly stored in safe private places. Done.

From these 24 words you can not only recover your current balance and your currently funded Bitcoin addresses but the entire history of all Bitcoin transactions ever made into and out of the wallet from the first funding transaction to the last. This, opposed to a non deterministic wallet that grows over time as you use it since it has to remember every address ever used in order to reconstruct your transaction history. A data file that grows larger over time and you have to remember to back up versus backing up the seed and keeping it VERY safe.

Burt, you are the man! thanks for clearing that up

Now you mentioned that the deterministic wallet doesn't have to keep track of every transaction like core does, are you referring to the blockchain? If so, would that mean that all deterministic wallets use 3rd party blockchain service? and if so, isn't that something i should avoid?

thanks