The largest provider of crypto hardware wallets announced a new service this week called "Ledger Recover" aimed at protecting users from lost recovery phrases. However, Ledger's announcement faced strong opposition due to security concerns.
Ledger describes the Recover feature as an ID-based key recovery service that provides a backup for the secret recovery phrase of a hardware wallet (Secret Recovery Phrase). In the event of losing these 12 or 24 words, the Recover service is intended to securely restore the private keys using a Ledger device. Customers of the wallet provider expressed strong objections to the new feature on social media because "Recover" requires online storage of the secret recovery phrase and connection with a passport or ID card.
Ledger Recover: A misunderstood function?
Hardware wallets are specialized devices used for secure offline storage of private keys for cryptocurrencies. Unlike wallets stored on computers or smartphones, these devices are less vulnerable to hacking as they are not connected to the internet—a concept known as "cold storage." Hardware wallets play a crucial role in the world of digital assets by providing an additional layer of security and reducing the risk of losing investments due to cyber attacks. In the event of a hardware wallet failure, the recovery phrase (also known as Secret Recovery or Seed Phrase) serves as the final access key to restore the held cryptocurrencies.
The high level of security provided by a hardware wallet stems from the fact that the private key does not interact with the internet. Even if an attacker gains control of a potential victim's computer, they cannot access the digital assets. However, the Ledger Recover feature breaks down an encrypted version of the recovery phrase into three fragments that are digitally stored with Coincover, Ledger, and an independent backup service provider. Given the previous data breaches at Ledger, it is understandable that users are concerned about the security of this feature.
"I can't believe what I'm reading. It seems absolutely crazy that a hardware wallet provider is asking users to secure their seed phrase online AND give them their passport/ID – especially from a provider that has previously suffered a privacy breach!" - Reddit user on the r/Cryptocurrency forum
Unfortunate PR work by the provider
A statement from the official Twitter account in response to the backlash sparked further controversy. The now-deleted tweet mentioned that it has "technically always been possible to develop firmware that makes key extraction easier." Users have always relied on the support profile's assurance that Ledger does not deploy such firmware through new updates. According to a new statement on Twitter, this was a "confusing wording" by a customer support representative.
[1/3] You may have seen a tweet from our Ledger Support account being shared regarding Ledger firmware updates.
Unfortunately, in our attempt to clarify how Ledger and all wallets work with the firmware, a customer support agent posted a tweet with confusing wording. https://t.co/cL6UrBzxWr
— Ledger Support (@Ledger_Support) May 18, 2023
In a technical explanation of the Recover function, CTO Charles Guillemet clarified that none of these new recovery features are automatically enabled on the provider's hardware wallets. Recover is only initiated with the explicit consent through the hardware wallet itself, and Ledger as a company has no access to its customers' secret recovery phrases.
