Extended public keys can be used to generate an almost infinite number of public keys and thus also Bitcoin addresses. For example, with a Bitcoin savings plan, we take a new address from your wallet each time, provided you have stored an extended public key here.
The extended public key shows you which Bitcoin holdings are in the corresponding Bitcoin wallet. However, you cannot use it to spend Bitcoin. Think of it as a window in a high-security vault. You can see what's inside, but you can't access it.
There are different formats, which are referred to as XPUB, YPUB, or ZPUB.
Extended public keys always begin with one of the corresponding prefixes: “xpub,” “ypub,” or “zpub.” The first letter indicates the type of addresses that should be generated with the respective extended public keys:
XPUB becomes legacy addresses beginning with “1”
YPUB becomes SegWit addresses, starting with “3”
ZPUB becomes native SegWit addresses, starting with “bc1”
It is therefore possible that a wallet may display an extended public key that references the wrong address format. Although caution is advised here, this does not usually result in the loss of Bitcoin.
However, this will probably not continue in the future, as the new Taproot address format does not use a new designation, but rather an XPUB that contains the description of the address format, etc. For this reason, we will always refer to it as Extended Public Key or XPUB in the future. Unfortunately, we do not currently support the Taproot format for our services.
Adding an Extended Public Key is mandatory for selling Bitcoin on Coinfinity. This is the only way we can ensure that the Bitcoin you send actually comes from the corresponding wallet.
Sub-accounts in hardware wallets
The structure behind wallets is sometimes not easy to understand. In addition to the level of different address formats, there is also another level for each address format in which a theoretically infinite number of wallets can be derived under the same private key (see the figure below).
If you want to use a different address format or sub-account when adding your wallet to Coinfinity, this is possible, but in this case you will need to add the wallet manually. We have described how this works in detail in the respective instructions under “Manually add and confirm wallet.”
A sub-account may be of interest to you if you place particular value on additional privacy. The XPUB of a sub-account only allows conclusions to be drawn about the transactions within that one account – all other accounts on your wallet remain unaffected and cannot be viewed. If you wish, you can create your own sub-account specifically for interacting with Coinfinity, thus separating your activities from the rest of your wallet.