[BIP Proposal] Compressed Base58 Encoding for BIP-39 Mnemonics with Multisig Extensions

The method introduced suggests condensing BIP-39 mnemonic phrases into a 24-character string using Base58 encoding. This proposed system marks a departure from the traditional 12-word mnemonics, aiming for a more compact and simplified representation without sacrificing the deterministic, reversible qualities inherent in current seed generation methodologies.

A notable feature of this proposal is its optional extension for multi-signature (multisig) setups, which is particularly advantageous for scenarios such as 2-of-3 schemes. In these arrangements, each participant would store a compressed local mnemonic alongside the extended public keys (xpubs) from other participants, concatenated into a single Base58 string equipped with a checksum to ensure integrity. This format, envisioned to be around 252 characters long, is designed to facilitate secure, distributed storage and improve the management of mnemonic and multisig data within limited space situations, like physical backups or QR codes.

Further detailed in the proposal is the encoding process, which involves specific division and remainder operations to map each word from the BIP-39 English wordlist to a unique two-character code. The choice of Base58 is justified by its efficiency and compatibility, offering the capacity to uniquely represent all 2048 words. Additionally, the structure and verification processes for the multisig storage format are elucidated, showing how this condensed format could streamline operations involving multiple parties and locations.

Finally, Zach, the proponent of this initiative, actively solicits feedback from the Bitcoin-Dev community on his draft, signaling a willingness to incorporate suggestions to refine the proposal further. He acknowledges the foundational contributions of the BIP-39 authors and the Bitcoin community's role in establishing Base58 standards, situating his proposal as a continuation of these efforts while striving for advancements in wallet security and usability. His work represents a thoughtful attempt to reconcile the needs for compactness and security in cryptocurrency storage and management, as evidenced in the ongoing work towards Bitcoin Core enhancement through GitHub, albeit noted as a work in progress.