Address derivation paths are like treasure maps in a hierarchical deterministic wallet, detailing exactly where each key is buried. Defined in BIP-44 or BIP-32, these paths break down the process of generating many addresses from a single master seed. For instance, m/44'/0'/0'/0/0 points to the very first receiving address for Bitcoin under BIP-44’s guidelines.

They ensure uniformity and compatibility across different wallets so that if you import your seed words into another BIP-44-compatible wallet, you’ll see the same addresses. It’s a powerful system that keeps your funds organized, and it’s also the reason losing your seed phrase is a really bad day: the entire ‘map’ to all your keys depends on that one phrase.