A derivation path is what allows you to produce multiple different keys from the same seed phrase.
A seed phrase can produce and reproduce many different bitcoin keys, which can control the movement of bitcoin.
Some of these keys could used to help secure a bitcoin wallet, while others keys could be used to help secure other separate wallets. By using the same seed phrase to protect multiple wallets, you can minimize the number of sensitive items you are responsible for.
Tip: In an Unchained account, you can use the same seed phrase and hardware wallet to build multiple vaults (wallets)!
You can think of a derivation path as the pathway instructions to navigate from your seed phrase to the subset of keys you'll be using for a particular purpose (such as a building a wallet). Learn more about derivation paths in our dedicated article.
Using different derivation paths for different wallets is necessary to avoid reusing the same subset of keys, which could have negative privacy consequences. Unchained helps you avoid this mistake automatically, by preventing you from using the same key and derivation path across multiple vaults.
Note: If you want to use the same seed phrase and hardware wallet across multiple different accounts, you will receive an error unless you adjust the derivation path. Learn how.
Since each vault you build involves different derivation paths, this is another reason why it's important to save the wallet configuration file for each vault you build. The file contains all of the derivation path information that you'll need to know for wallet recovery.