Chain Code Delegation: Privacy and Control in Bitcoin Key Custody
Chain Code Delegation is a collaborative custody technique for Bitcoin keys that enhances privacy, security, and spending policy enforcement. Unlike standard BIP32 hierarchical wallets where xpubs grant full visibility into key derivations, custodians in chain code delegation hold only a non-extended public key and receive BIP32 scalar tweaks off-chain at signing time. The chain code delegation method establishes spending conditions—such as change output verification and rate limits—by requiring users to provide scalar tweaks for each output index. These tweaks enable custodians to derive child keys (P_i = P_par + G*t_i) and sign transactions without accessing the full chain code or monitoring other UTXOs. Privacy is improved as custodians only see transactions they sign, and advanced methods like blind Schnorr signatures can further conceal predicate details. Security risk is minimized: without chain code or tweaks, custodial keys cannot sign UTXOs, and any leaked tweak is only valid for a narrow time window. Chain Code Delegation offers a flexible approach to enforce access controls across devices—from mobile wallets to hardware signers—optimizing custody solutions for Bitcoin traders and institutions.
Bullish
Chain Code Delegation introduces a privacy-preserving, secure custody model that reduces risk for custodians and enforces configurable spending policies. By limiting key exposure and providing off-chain scalar tweaks, it boosts confidence among institutional traders and service providers. Similar custody innovations—such as multisig P2WSH and threshold signatures—have historically driven higher capital inflows and adoption. In the short term, integration efforts may be gradual, but in the long term, improved custody solutions tend to support institutional onboarding, network growth, and bullish sentiment for Bitcoin.