- What’s the advantage of using a Deterministic Wallet, as opposed to generating many different keypairs?
It’s easier to backup a single deterministic wallet (one seed phrase to backup) opposed to backup many key/pairs (private key + public key). Also, a deterministic wallet can easily regenerate all the keys.
- What advantage does a Type-2 wallet have over Type-1?
In both cases, keys can be regenerated, but the type-1 wallet must generate e.g. a thousand of addresses ahead and store them, type-2 doesn’t. Type-2 can also regenerate the addresses with a mathematical function. Type-2 wallets and backups use less storage.
- What is the anonymity set for a receiver using a Deterministic Wallet?
The receiver has a very large anonymity set, as he can use a new address for every new transaction. The only problem is when he spends the funds it may be possible to link those addresses together.