Turns out Ledger can hold some of your crypto wallet’s keys, if you agree to it
Follow me on Twitter @Jacqmelinek for breaking crypto news, memes and more.
Welcome back to Chain Reaction.
Ledger, one of the biggest crypto wallet providers, has launched a new feature called Ledger Recover, and not everyone is happy about it.
Earlier this week, Ledger launched a subscription service that lets users recover their private keys (AKA what helps them access their hard wallets) if they lose them.
The $9-per-month subscription service requires users who opt-in to the service to provide their identification per KYC guidelines. The tool would then encrypt their private keys into three pieces and send them to three different companies: Ledger, Coincover and EscrowTech. The three companies would then use that KYC information to verify wallet holders when they want to use the recovery tool.
That sounds nice and helpful, right?
Yesterday I freaked out about the revelation that @Ledger could spit out your private key with a firmware update.
Yet I noticed the smartest people were not freaking out. Was I missing something?
I spent the evening educating myself, and now I'm in the "nvm it's fine" camp.
— Haseeb ＞|＜ (@hosseeb) May 17, 2023
Well, not to everyone.
Crypto twitter is downright incensed by this. Cold wallets are also supposed to be offline and fully self-custodied, compared to hot wallets, which are connected to the internet. And a lot of people don’t want anyone, including the company that sold them their cold crypto wallet, to know their private keys.
Why? Well, a lot of people believe this service lets Ledger access customers’ private keys, which the company previously said it would never do.
A Ledger spokesperson refuted that, saying, "Customers can create an encrypted backup of their private keys which is then sharded and encrypted further [...] The private key can only be decrypted and reconstituted on a Ledger's secure element chip, just as it is initially encrypted and fragmented there. Ledger cannot and does not access users' private keys."
Moreover, people are not happy that the service requires users who may otherwise want to be anonymous to share their identities through a KYC process.
Not to mention some customers are wary of trusting the company (or any crypto company) with their information. And they have reason to: Ledger leaked customers’ contact information in 2020.
After all the backlash, Ledger tried to defend its position, but somehow managed to enrage its users further in a now-deleted tweet, “Technically speaking it is and always has been possible to write firmware that facilitates key extraction. You have always trusted Ledger not to deploy such firmware whether you knew it or not.”
On Thursday, the firm’s chief technical officer Charles Guillemet put out a tweet thread in an attempt to diffuse the fire. “If you want to use Ledger Recover, you’ll have to consent on your device for the backup or the recovery process.”
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Subscribe to Chain Reaction on Apple Podcasts, Spotify or your favorite pod platform to keep up with the latest episodes, and please leave us a review if you like what you hear!
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This list was compiled with information from Messari as well as TechCrunch’s own reporting.
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Editors note: This article was updated after publication to add a comment from Ledger.