diff --git a/keychain/derivation.go b/keychain/derivation.go
new file mode 100644
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--- /dev/null
+++ b/keychain/derivation.go
@@ -0,0 +1,159 @@
+package keychain
+
+import "github.com/roasbeef/btcd/btcec"
+
+const (
+	// KeyDerivationVersion is the version of the key derivation schema
+	// defined below. We use a version as this means that we'll be able to
+	// accept new seed in the future and be able to discern if the software
+	// is compatible with the version of the weed.
+	KeyDerivationVersion = 0
+
+	// BIP0043Purpose is the "purpose" value that we'll use for the first
+	// version or our key derivation scheme. All keys are expected to be
+	// derived from this purpose, then the particular coin type of the
+	// chain where the keys are to be used.  Slightly adhering to BIP0043
+	// allows us to not deviate too far from a widely used standard, and
+	// also fits into existing implementations of the BIP's template.
+	//
+	// NOTE: BRICK SQUUUUUAD.
+	BIP0043Purpose = 1017
+)
+
+// KeyFamily represents a "family" of keys that will be used within various
+// contracts created by lnd. These families are meant to be distinct branches
+// within the HD key chain of the backing wallet. Usage of key families within
+// the interface below are strict in order to promote integrability and the
+// ability to restore all keys given a user master seed backup.
+//
+// The key derivation in this file follows the following hierarchy based on
+// BIP43:
+//
+//   * m/1017'/coinType'/keyFamily/0/index
+type KeyFamily uint32
+
+const (
+	// KeyFamilyMultiSig are keys to be used within multi-sig scripts.
+	KeyFamilyMultiSig KeyFamily = 0
+
+	// KeyFamilyRevocationBase are keys that are used within channels to
+	// create revocation basepoints that the remote party will use to
+	// create revocation keys for us.
+	KeyFamilyRevocationBase = 1
+
+	// KeyFamilyHtlcBase are keys used within channels that will be
+	// combined with per-state randomness to produce public keys that will
+	// be used in HTLC scripts.
+	KeyFamilyHtlcBase KeyFamily = 2
+
+	// KeyFamilyPaymentBase are keys used within channels that will be
+	// combined with per-state randomness to produce public keys that will
+	// be used in scripts that pay directly to us without any delay.
+	KeyFamilyPaymentBase KeyFamily = 3
+
+	// KeyFamilyDelayBase are keys used within channels that will be
+	// combined with per-state randomness to produce public keys that will
+	// be used in scripts that pay to us, but require a CSV delay before we
+	// can sweep the funds.
+	KeyFamilyDelayBase KeyFamily = 4
+
+	// KeyFamilyRevocationRoot is a family of keys which will be used to
+	// derive the root of a revocation tree for a particular channel.
+	KeyFamilyRevocationRoot KeyFamily = 5
+
+	// KeyFamilyNodeKey is a family of keys that will be used to derive
+	// keys that will be advertised on the network to represent our current
+	// "identity" within the network. Peers will need our latest node key
+	// in order to establish a transport session with us on the Lightning
+	// p2p level (BOLT-0008).
+	KeyFamilyNodeKey KeyFamily = 6
+)
+
+// KeyLocator is a two-tuple that can be used to derive *any* key that has ever
+// been used under the key derivation mechanisms described in this file.
+// Version 0 of our key derivation schema uses the following BIP43-like
+// derivation:
+//
+//   * m/201'/coinType'/keyFamily/0/index
+//
+// Our purpose is 201 (chosen arbitrary for now), and the coin type will vary
+// based on which coin/chain the channels are being created on. The key family
+// are actually just individual "accounts" in the nomenclature of BIP43. By
+// default we assume a branch of 0 (external). Finally, the key index (which
+// will vary per channel and use case) is the final element which allows us to
+// deterministically derive keys.
+type KeyLocator struct {
+	// TODO(roasbeef); add the key scope as well??
+
+	// Family is the family of key being identified.
+	Family KeyFamily
+
+	// Index is the precise index of the key being identified.
+	Index uint32
+}
+
+// IsEmpty returns true if a KeyLocator is "empty". This may be the case where we
+// learn of a key from a remote party for a contract, but don't know the
+// precise details of its derivation (as we don't know the private key!).
+func (k KeyLocator) IsEmpty() bool {
+	return k.Family == 0 && k.Index == 0
+}
+
+// KeyDescriptor wraps a KeyLocator and also optionally includes a public key.
+// Either the KeyLocator must be non-empty, or the public key pointer be
+// non-nil. This will be used by the KeyRing interface to lookup arbitrary
+// private keys, and also within the SignDescriptor struct to locate precisely
+// which keys should be used for signing.
+type KeyDescriptor struct {
+	// KeyLocator is the internal KeyLocator of the descriptor.
+	KeyLocator
+
+	// PubKey is an optional public key that fully describes a target key.
+	// If this is nil, the KeyLocator MUST NOT be empty.
+	PubKey *btcec.PublicKey
+}
+
+// KeyRing is the primary interface that will be used to perform public
+// derivation of various keys used within the peer-to-peer network, and also
+// within any created contracts. All derivation required by the KeyRing is
+// based off of public derivation, so a system with only an extended public key
+// (for the particular purpose+family) can derive this set of keys.
+type KeyRing interface {
+	// DeriveNextKey attempts to derive the *next* key within the key
+	// family (account in BIP43) specified. This method should return the
+	// next external child within this branch.
+	DeriveNextKey(keyFam KeyFamily) (KeyDescriptor, error)
+
+	// DeriveKey attempts to derive an arbitrary key specified by the
+	// passed KeyLocator. This may be used in several recovery scenarios,
+	// or when manually rotating something like our current default node
+	// key.
+	DeriveKey(keyLoc KeyLocator) (KeyDescriptor, error)
+}
+
+// SecretKeyRing is a similar to the regular KeyRing interface, but it is also
+// able to derive *private keys*. As this is a super-set of the regular
+// KeyRing, we also expect the SecretKeyRing to implement the fully KeyRing
+// interface. The methods in this struct may be used to extract the node key in
+// order to accept inbound network connections, or to do manual signing for
+// recovery purposes.
+type SecretKeyRing interface {
+	KeyRing
+
+	// DerivePrivKey attempts to derive the private key that corresponds to
+	// the passed key descriptor.
+	DerivePrivKey(keyDesc KeyDescriptor) (*btcec.PrivateKey, error)
+
+	// ScalarMult performs a scalar multiplication (ECDH-like operation)
+	// between the target key descriptor and remote public key. The output
+	// returned will be the sha256 of the resulting shared point serialized
+	// in compressed format. If k is our private key, and P is the public
+	// key, we perform the following operation:
+	//
+	//  sx := k*P
+	//  s := sha256(sx.SerializeCompressed())
+	ScalarMult(keyDesc KeyDescriptor, pubKey *btcec.PublicKey) ([]byte, error)
+}
+
+// TODO(roasbeef): extend to actually support scalar mult of key?
+//  * would allow to push in initial handshake auth into interface as well