diff --git a/index.js b/index.js
index 7139d37..858d6a0 100644
--- a/index.js
+++ b/index.js
@@ -18,11 +18,13 @@ bitcore.encoding.BufferReader = require('./lib/encoding/bufferreader');
 bitcore.encoding.BufferWriter = require('./lib/encoding/bufferwriter');
 bitcore.encoding.Varint = require('./lib/encoding/varint');
 
+// utilities
 bitcore.util = {};
 bitcore.util.bitcoin = require('./lib/util/bitcoin');
 bitcore.util.buffer = require('./lib/util/buffer');
 bitcore.util.js = require('./lib/util/js');
 
+// errors thrown by the library
 bitcore.errors = require('./lib/errors');
 
 // main bitcoin library
@@ -41,7 +43,7 @@ bitcore.Txin = require('./lib/txin');
 bitcore.Txout = require('./lib/txout');
 
 
-//dependencies, subject to change
+// dependencies, subject to change
 bitcore.deps = {};
 bitcore.deps.bnjs = require('bn.js');
 bitcore.deps.bs58 = require('bs58');
@@ -53,3 +55,6 @@ bitcore.deps.elliptic = require('elliptic');
 //bitcore.txpartial = require('lib/txpartial');
 
 //bitcore.bip70 = require('lib/bip70');
+
+// Internal usage, exposed for testing/advanced tweaking
+bitcore._HDKeyCache = require('./lib/hdkeycache');
diff --git a/lib/hdkeycache.js b/lib/hdkeycache.js
index d2e566b..721d9da 100644
--- a/lib/hdkeycache.js
+++ b/lib/hdkeycache.js
@@ -1,16 +1,45 @@
 'use strict';
 
-var cache = {};
-
 module.exports = {
+  _cache: {},
+  _count: 0,
+  _eraseIndex: 0,
+  _usedList: {},
+  _usedIndex: {},
+  _CACHE_SIZE: 5000,
+
   get: function(xkey, number, hardened) {
+    hardened = !!hardened;
     var key = xkey + '/' + number + '/' + hardened;
-    if (cache[key]) {
-      return cache[key];
+    if (this._cache[key]) {
+      this._cacheHit(key);
+      return this._cache[key];
     }
   },
   set: function(xkey, number, hardened, derived) {
+    hardened = !!hardened;
     var key = xkey + '/' + number + '/' + hardened;
-    cache[key] = derived;
+    this._cache[key] = derived;
+    this._cacheHit(key);
+  },
+  _cacheHit: function(key) {
+    if (this._usedIndex[key]) {
+      delete this._usedList[this._usedIndex[key]];
+    }
+    this._usedList[this._count] = key;
+    this._usedIndex[key] = this._count;
+    this._count++;
+    this._cacheRemove();
+  },
+  _cacheRemove: function() {
+    while (this._eraseIndex < this._count - this._CACHE_SIZE) {
+      if (this._usedList[this._eraseIndex]) {
+        var removeKey = this._usedList[this._eraseIndex];
+        delete this._usedIndex[removeKey];
+        delete this._cache[removeKey];
+      }
+      delete this._usedList[this._eraseIndex];
+      this._eraseIndex++;
+    }
   }
 };
diff --git a/test/hdkeycache.js b/test/hdkeycache.js
new file mode 100644
index 0000000..57635d4
--- /dev/null
+++ b/test/hdkeycache.js
@@ -0,0 +1,50 @@
+'use strict';
+
+var _ = require('lodash');
+var expect = require('chai').expect;
+var bitcore = require('..');
+var HDPrivateKey = bitcore.HDPrivateKey;
+
+var xprivkey = 'xprv9s21ZrQH143K3QTDL4LXw2F7HEK3wJUD2nW2nRk4stbPy6cq3jPPqjiChkVvvNKmPGJxWUtg6LnF5kejMRNNU3TGtRBeJgk33yuGBxrMPHi';
+
+describe('HDKey cache', function() {
+  /* jshint unused: false */
+  var cache = bitcore._HDKeyCache;
+  var master = new HDPrivateKey(xprivkey);
+
+  beforeEach(function() {
+    cache._cache = {};
+    cache._count = 0;
+    cache._eraseIndex = 0;
+    cache._usedIndex = {};
+    cache._usedList = {};
+    cache._CACHE_SIZE = 3; // Reduce for quick testing
+  });
+
+  it('saves a derived key', function() {
+    var child = master.derive(0);
+    expect(cache._cache[master.xprivkey + '/0/false'].xprivkey).to.equal(child.xprivkey);
+  });
+  it('starts erasing unused keys', function() {
+    var child1 = master.derive(0);
+    var child2 = child1.derive(0);
+    var child3 = child2.derive(0);
+    expect(cache._cache[master.xprivkey + '/0/false'].xprivkey).to.equal(child1.xprivkey);
+    var child4 = child3.derive(0);
+    expect(cache._cache[master.xprivkey + '/0/false']).to.equal(undefined);
+  });
+  it('avoids erasing keys that get cache hits ("hot keys")', function() {
+    var child1 = master.derive(0);
+    var child2 = master.derive(0).derive(0);
+    expect(cache._cache[master.xprivkey + '/0/false'].xprivkey).to.equal(child1.xprivkey);
+    var child1_copy = master.derive(0);
+    expect(cache._cache[master.xprivkey + '/0/false'].xprivkey).to.equal(child1.xprivkey);
+  });
+  it('keeps the size of the cache small', function() {
+    var child1 = master.derive(0);
+    var child2 = child1.derive(0);
+    var child3 = child2.derive(0);
+    var child4 = child3.derive(0);
+    expect(_.size(cache._cache)).to.equal(3);
+  });
+});