We demonstrate that Daubechies wavelets can be used to construct a minimal
set of optimized localized contracted basis functions in which the Kohn-Sham
orbitals can be represented with an arbitrarily high, controllable precision.
Ground state energies and the forces acting on the ions can be calculated in
this basis with the same accuracy as if they were calculated directly in a
Daubechies wavelets basis, provided that the amplitude of these contracted
basis functions is sufficiently small on the surface of the localization
region, which is guaranteed by the optimization procedure described in this
work. This approach reduces the computational costs of DFT calculations, and
can be combined with sparse matrix algebra to obtain linear scaling with
respect to the number of electrons in the system. Calculations on systems of
10,000 atoms or more thus become feasible in a systematic basis set with
moderate computational resources. Further computational savings can be achieved
by exploiting the similarity of the contracted basis functions for closely
related environments, e.g. in geometry optimizations or combined calculations
of neutral and charged systems
