Every time you request coins or send coins, Armory creates a new address from the initial seed. After a lot of use, I imagine that Armory could get really filled with thousands of bitcoin addresses, many of which would have been used once and discarded.
Question: When you restore your wallet from a paper backup, I assume Armory has to go through all the same steps it used to generate the addresses before, and check them one by one to see if they have anything. Is there a limit to the number of addresses it scans through? E.g., if I used over 100,000 transactions (hypothetically), with all my remaining coins being in adress #100,001, and restore Armory from a paper backup, is there a chance that Armory will use the seed to generate and check only the first 100,000 addresses, and miss my coins in the 100,001 address entirely?
It checks 100 at a time, checking the next 100 if the key pool has less than 90 empty addresses. You can change this keypool size from the command line, i.e.
--keypool=1000
I meant to make it a geometric distribution, (check 100, then 200, then 400, then 800, etc), to avoid taking forever to scan an enormous wallet. Instead, you can switch to "Expert" usermode and a new button will appear in the wallet properties, that lets you generate as many addresses as you want. The intention was, rather than try to do something fancy, the user probably has some idea of how many addresses they used, and if they used so many that they need this, they can find it in the expert usermode.
