Key derivation

When you create a new account, Ripple Custody derives its blockchain key using the custodian's key management system (KMS). The key-derivation process depends on a number of factors, including the derivation strategy you choose and the capabilities of the ledger with which you associate the account.

For more information, about account creation, see Create accounts in the Ripple Custody API guide.

During account creation, Ripple Custody can generate blockchain keys using different strategies, depending on the KMS. Ripple Custody supports the following strategies:

• Deterministic key-derivation strategies, such as BIP32 and SLIP10, with both hard and soft derivations. With hard derivation, each new derivation (for example, for the generation of a new address) needs access to the master seed in the vault, while soft derivation does not.
• Random key-generation strategies: The key material for the new wallet is not derived at all from the seed, but generated randomly.

All these strategies store the key material in the database, wrapped with the KMS master key where applicable.

When you create a new Ripple Custody account using hard or soft key derivation, Ripple Custody assigns the account a derivation path p, which is a unique sequence of numbers representing the domain d and account number a. For hard derivations, this results in derivation path m/d'/a', where ' represents hard derivation and m is the master seed.

This derivation path p together with the wrapped seed and the ledger-dependent curve (secp256k1 or Ed25519) are transmitted to the KMS, which performs key derivation. The KMS returns the derived extended public key to Ripple Custody, which stores the key in the database.

When Ripple Custody attempts to generate a transaction from the account, the vault requests the KMS to sign the transaction payload using the wrapped seed and the derivation path. Based on these parameters, the KMS deterministically derives the secret key, signs the provided data, and returns the signature to the vault.

For UTXO-based ledgers, such as Bitcoin, the KMS derives each UTXO account u based on the parent domain d and account a, resulting in derivation path: m/d'/a'/u.

The following diagram shows a hard derivation strategy, including hard derivation of the domain index and account index, which means that access to the the master seed (the private key) is required in order to perform the derivation. For this reason, new account creation always needs direct access to the vault component.

At the bottom level, individual UTXO addresses are derived using a soft approach, which means that they are derived directly from the extended public key of the wallet, without a requirement to access the vault directly. This is convenient for an infrastructure that includes a cold, disconnected vault. In cases such as this, creation of new accounts requires access to the vault for security reasons, but further requests to create addresses do not need direct access to the vault.

If you choose to create an account with a soft key-derivation strategy, all derivations, right from the master seed downwards, are performed using a soft approach. This is only supported for ledger protocols based on Elliptic Curve Digital Signature Algorithm (ECDSA), such as Bitcoin, Ethereum, Tron, and XRPL. If you require soft key derivation, contact your Ripple liaison.

For a KMS that doesn't support deterministic derivation schemes, you can use a random key strategy during account creation. With this strategy, keys are generated randomly with no key derivation. However, addresses within the account, if on a multi-address ledger protocol like Bitcoin, are generated with soft derivation, if the KMS supports it, and if not, with random generation. If you require random key generation, contact your Ripple liaison.

The following table lists the key-derivation strategies available for each ledger.

With the VaultHard and VaultSoft key-derivation strategies, Ripple Custody supports derivation using different elliptic curves, where key derivation for a specific ledger requires the usage of a specific curve. For each identifier, the following curve and derivation paths are available. For each derivation path, d is domain, a is account, and ' is hard derivation: