Robert Steinadler, 13 days ago

Sharing Shards: Ledger Recover sparks controversy

Creating reliable backups of one’s hardware wallets is perhaps the most important thing. This is usually done by writing down a so-called seed phrase consisting of 24 words. Losing this recovery phase means losing access to the wallet if it is lost or physically damaged. A couple of methods are available to ensure the seed is kept safe. Some users go so far as to engrave them in steel plates to make them fire and waterproof. 

Ledger is trying to offer a service that makes backups and recovery more accessible. Still, this attempt backfires before the new platform is even started. 

Ledger Recover hasn’t even started yet

Ledger Recover is a new service starting soon in the EU, UK, Canada, and the US. Users of a Ledger Nano X will be able to create a unique backup that is sent to Ledger and two other custodians. Before sending, the seed is encrypted on the device and split into three parts before sending it. This assures that only some of the three providers could recover the wallet.

But the service goes beyond splitting up seed phrases. Each backup is tied to the identity of the owner. This means that customers of Ledger Recover have to identify themselves with their passports to Onfido, a KYC provider also active in the banking sector.

Should access to the hardware ever be lost, customers can identify themselves and receive all three shards from their custodians.

The crypto community is not amused

The service has been announced today, and according to the official website, Ledger Recover hasn’t even started yet. At the same time, the crypto community is reacting heavily to the announcement. Opening up the possibility that a hardware wallet could somehow share a seed – even fragmented into three encrypted shards – is something new. Something that many crypto enthusiasts believe is comparable to Pandora’s box.

They fear such an option could create an additional attack vector for hackers. Another concern is identity theft. What if someone who looks like the owner steals his passport and initiates a recovery?

Many members of the broader crypto community voiced their concern over social media, and some even went so far as to warn against using devices from Ledger. According to an official statement from the company, all devices and seed phrases are safe. Any information gets shared only if a user actively decides to use Ledger Recover. It remains to be seen if the hardware manufacturer can convince customers despite the heavy backlash.

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Hardware wallets are the top-notch solution to keep cryptocurrencies and NFTs safe and sound. The devices are designed to provide a secure environment that is immune to remote access by any attacker. Therefore, most influencers, the broader media, and crypto communities recommend using a hardware wallet. Especially beginners are being told to use them to store their crypto. This is only sound advice given the fact that crypto worth billions of dollars got lost since the inception of Bitcoin.

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