Hardware Wallets - How the Backup Passphrase Is Able Recover All Your Crypto Addresses!

In the event you lose your hardware wallet, all you need to do is use your previously created backup passphrase key on a new hardware wallet to restore all your crypto accounts and balances.

This got me thinking, and I've been pondering this for a long time... so then how does the recovery passphrase for your hardware wallet, that you create BEFORE you create your crypto addresses on said wallet, have the ability to recover crypto wallets that you set up AFTER creating the passhrase? Saying another way, how does the hardware wallet know my subsequently created crypto wallet addresses based on a previously created passphrase seed?

To begin with, we need to understand the passphrase seed setup and recovery process. I found an absolutely great article about these process here:
https://steemit.com/recovery/@cognoscere/testing-recovery-of-a-hierarchical-deterministic-hd-hardware-cryptocurrency-wallet

Now this is just a theory, and I'm curious to get all your thoughts and/or confirmations on this...

My theory is that all the potential crypto wallet addresses are pre-created as derivatives of the main password seed. That is, when you "create" a new crypto wallet, you are just opening access to a previously created crypto wallet that was generated when the original passphrase seed was generated.

Thus, when you recover your passphrase on a fresh new hardware wallet, when you use your original passphrase seed, all of the potential wallets are then recovered as well. Then by interfacing with the web application, the interface simply checks to see if wallets were accessed or "created" and checks for balances within them by synchronizing the address with the public blockchain.

And Voila! You recover your hardware wallet and have access to all your funds!

So now the million dollar question... do I have this right?

• Kalienx777