Ledger Recover: A Step Toward Security Or A Backdoor?

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As a key player in the cryptocurrency hardware wallet market, Ledger has always been at the forefront of technological innovations. Their latest offering, Ledger Recover, is an over-the-air firmware update that introduces a novel way for users to back up their seed phrases using third-party entities. The Ledger Recover service is optional and only available to those who opt in.

Ledger Recover: A Brief Overview

Ledger Recover is a service designed to enable users of Ledger's hardware wallet to back up their secret recovery phrases. This feature is introduced as an over-the-air firmware update. Once a user opts into this new service, the recovery phrase fragments are encrypted and stored by three separate entities. This allows the user to recover their phrase in the future if needed.

It's important to note that this firmware update is not available for the Ledger Nano S, which is Ledger's most affordable hardware wallet. This is because the Nano S's chipset does not have enough memory to accommodate the new firmware.

User Concerns And Ledger's Response

Ledger Recover

The world of cryptocurrencies thrives on decentralization and security. It’s a realm where trustless transactions are valued, and the users hold the ultimate control over their assets. This ethos of control and autonomy is also expected to extend to hardware wallets. This is the crux of the user concerns surrounding Ledger Recover.

The launch of this new feature was met with significant resistance from the cryptocurrency community, largely due to the fact that it involves the seed phrase leaving the hardware wallet.

This was a major concern for users who consider Ledger as a trustless service for storing cryptocurrencies. The belief in decentralization is crypto-wealth which should never leave the secure confines of their hardware wallet.

This concept is rooted in the fundamental ethos of cryptocurrency: individual control and autonomy over one's assets, without dependence on external parties. Ledger Recover, with its novel approach of storing fragments of users' seed phrases with third parties, was seen as a departure from this philosophy.

One of the key concerns was that users saw this feature as an introduction of a potential 'backdoor' into their hardware wallets.

A backdoor, in cybersecurity terms, refers to a method by which the security of a system can be compromised.

In this context, users were worried that by allowing their seed phrases to be stored by third-party entities, they were exposing themselves to potential risks, including hacking and unauthorized access​​.

While Ledger clarified that the Ledger Recover does not impact the security model of the hardware wallet and is not a conspiracy, some users remained skeptical.

This skepticism stemmed from the notion of 'trustlessness' in the crypto world - the idea that one should not need to trust a third party for the security of their assets.

By introducing a system where parts of a user's seed phrase were stored by third parties, Ledger Recover seemed to be leaning more towards a trust-based model, which was unsettling for some users​.

Furthermore, Ledger's assurance that the update does not introduce a backdoor was seen as insufficient by some. The suggestion of having two different firmware to eliminate any "backdoor" concerns was shot down by the Ledger co-founder, which may have further fueled user concerns​.

The concerns about Ledger Recover are rooted in the core principles of the crypto world - decentralization, control, and security.

For many users, the idea of their seed phrase leaving their hardware wallet and being stored by third parties, even in fragments, is a hard pill to swallow.

Despite Ledger's assurances, these concerns persist, reflecting the ongoing debate about trust and security in the crypto hardware wallet market.

Ledger's Response

Addressing these concerns, Ledger co-founder and ex-CEO, Éric Larchevêque, made a post on Reddit clarifying that Ledger was never a completely trustless solution.

He emphasized that using Ledger's products requires a certain degree of trust in the company. Larchevêque assured users that the Ledger Recover update does not compromise the security model of Ledger's hardware wallets. He argued that Ledger remains safe, has no backdoor, and that Ledger Recover is not a conspiracy

Larchevêque further addressed a suggestion made by a user about having two different firmware to eliminate any "backdoor" concerns. He responded that such an approach "wouldn't change anything" and would personally disappoint him.

A Competitor's Response: GridPlus

Following the controversy over Ledger's firmware update, competing hardware wallet provider, GridPlus, saw an opportunity. They announced plans to open-source their device firmware in the third quarter of 2023 to deliver more transparency to their users. This move is seen as a direct response to Ledger's recent update, turning the controversy into a marketing opportunity.

Diagram: Ledger Recovery Process

Here's a diagram to help visualize the Ledger Recover process:

sequenceDiagram participant U as User participant L as Ledger Hardware Wallet participant R as Ledger Recover Service participant T1 as Third-party Entity 1 participant T2 as Third-party Entity 2 participant T3 as Third-party Entity 3 U->>L: Opt-in to Ledger Recover L->>R: Request to back up seed phrase R->>T1: Send encrypted fragment of seed phrase R->>T2: Send encrypted fragment of seed phrase R->>T3: Send encrypted fragment of seed phrase U->>R: Request to recover seed phrase R->>T1: Request encrypted fragment of seed phrase T1->>R: Send encrypted fragment of seed phrase R->>T2: Request encrypted fragment of seed phrase T2->>R: Send encrypted fragment of seed phrase R->>T3: Request encrypted fragment of seed phrase T3->>R: Send encrypted fragment of seed phrase R->>U: Recover and provide seed phrase

Final Thoughts

The introduction of Ledger Recover is a significant development in the world of hardware wallets. It has sparked a wide-ranging debate about trust and security in cryptocurrency storage. As the dust settles, it will be interesting to see how Ledger's initiative influences future innovations in the industry. No matter the perspective, it's clear that these discussions are crucial in forging the path forward for secure, user-friendly, and trustless cryptocurrency storage solutions.

Matt Barnes
Matt Barnes

Matt is the founder of TechMalak. When he's not buried face-deep in the crypto charts you can find him tinkering with the latest tech gadgets and A. I tools. He's a crypto investor and entrepreneur. He uses a mixture of A.I and human thought and input into all his articles on TechMalak, further merging man with machine.

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