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README.md - rewrite section devoted to BIP32 and key derivation

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@ -69,41 +69,28 @@ mnemonic or seed or a lost seed from the wallet or mnemonic. Keys from a
forgotten brainwallet can be recovered from the brainwallet’s corresponding
wallet file.
***mmgen-txcreate running in an Rxvt terminal window***
![mmgen-txcreate running in an Rxvt terminal window][9]
***mmgen-txcreate running in a terminal window***
![mmgen-txcreate running in a terminal window][9]
#### Why MMGen is not a BIP32 wallet
#### Simplified key derivation and seed-phrase generation
Most popular wallets today are based on the [BIP32][w] protocol. But while
BIP32 is undeniably powerful and flexible, it has two significant weaknesses, in
our view. First of all, it relies on elliptic-curve cryptography, which means
that with the advent of quantum computing, or perhaps the discovery of a
weakness in the secp256k1 curve, not only will your individual keys be at risk
but the entire system used to derive them. Thus an attacker could conceivably
gain access to all your crypto assets in one fell swoop. With MMGen you're
protected against this danger, as its key derivation scheme relies entirely on
the SHA256 and SHA512 cryptographic hash algorithms, which use no complex math
and are generally considered quantum-safe. Incidentally, a nice side-effect of
MMGen's hash-based KD scheme is that you can [recover your keys from an MMGen
seed without the MMGen program itself][r] using standard command-line utilities.
To deterministically derive its keys, MMGen uses a non-hierarchical scheme
differing from the one used by most of today's popular wallets based on the
BIP32 protocol. One advantage of this simple, hash-based scheme is that users
can easily [recover their private keys from their seed without the MMGen program
itself][r] using standard command-line utilities.
A second critical weakness of BIP32 is mentioned in the [text of the BIP][w]:
MMGen also differs from most cryptocurrency wallets today in its use of the
original 1626-word [Electrum wordlist][ew] for mnemonic seed phrases. Seed
phrases are derived using ordinary base conversion, allowing users to recover
their seeds from them in the absence of the MMGen program itself, should the
need arise. An example of how to do this at the Python prompt is provided
[here.][S]
> *One weakness that may not be immediately obvious, is that knowledge of a
> parent extended public key plus any non-hardened private key descending from
> it is equivalent to knowing the parent extended private key (and thus every
> private and public key descending from it).*
This means that the compromise of a single key could lead to the theft of
other, **or even all,** of your keys, something that MMGen's hash-based
derivation scheme once again protects you against. True, BIP32 does implement
“hardened” keys to counter this vulnerability, but with their use you lose the
ability to generate addresses from a master public key, which is the only
functionality an EC-based wallet provides over a hash-based one in the first
place. In which case you might as well be using a hash-based wallet like MMGen
for the additional security it provides. As to the master public key feature,
MMGen makes up for its absence by allowing you to easily generate address lists
for distribution to potential payers.
The original Electrum wordlist was derived from a [frequency list][fl] of words
found in contemporary English poetry. The high emotional impact of these words
makes seed phrases easy to memorize. Curiously, only 861 of them are shared by
the more prosaic 2048-word [BIP39 wordlist][bw] used in most wallets today.
### Download/Install
@ -145,6 +132,10 @@ Donate (BTC,BCH): 15TLdmi5NYLdqmtCqczUs5pBPkJDXRs83w
[8]: https://github.com/mmgen/MMGenLive
[9]: https://cloud.githubusercontent.com/assets/6071028/20677261/6ccab1bc-b58a-11e6-8ab6-094f88befef2.jpg
[r]: https://github.com/mmgen/mmgen/wiki/Recovering-Your-Keys-Without-the-MMGen-Software
[S]: https://github.com/mmgen/mmgen/wiki/Recovering-Your-Keys-Without-the-MMGen-Software#a_mh
[f]: https://github.com/mmgen/mmgen/wiki/Altcoin-and-Forkcoin-Support
[z]: https://user-images.githubusercontent.com/6071028/31656274-a35a1252-b31a-11e7-93b7-3d666f50f70f.png
[w]: https://github.com/bitcoin/bips/blob/master/bip-0032.mediawiki
[ew]: https://github.com/spesmilo/electrum/blob/1.9.5/lib/mnemonic.py
[bw]: https://github.com/bitcoin/bips/blob/master/bip-0039/english.txt
[fl]: https://en.wiktionary.org/wiki/Wiktionary:Frequency_lists/Contemporary_poetry