Cryptocurrency community responds to Ledger wallet’s concealed recovery phrase feature

A number of members from the crypto community, including owners of Ledger wallets, have taken to social media to voice their dissatisfaction following the announcement of Ledger’s new feature. The recently launched recovery solution for its hardware crypto wallets, referred to as Ledger Recover, is designed to provide a safety net in the event that users lose their seed phrase.

Exciting update, Ledger has a new product, Ledger Recover, that’s launching soon: https://t.co/nT1VHnnSYz
Here’s what Ledger Recover is and what it isn’t, explained by @P3b7_ & in the thread below. pic.twitter.com/RW1w07H6pK

— Ledger (@Ledger) May 16, 2023

Ledger Recover operates as a subscription service that enables users to implement an extra layer of security for their private keys. This service utilizes a method where the user’s seed phrase is split into three encrypted segments, each dispatched to different external parties. When these segments are merged and decrypted, they can be utilized to recreate the original seed phrase.

The wallet provider indicated that Ledger Recover is an optional subscription for those who wish to back up their secret recovery phrase. “You don’t have to use it, and can continue managing your recovery phrase yourself if that’s why you bought a Ledger,” the company clarified.

However, the idea has sparked outrage among many in the crypto community, including security experts.

Mudit Gupta, the chief information security officer at Polygon Labs, remarked, “It’s a horrendous idea, DON’T enable this feature.” Gupta elaborated further in his Twitter thread that “[t]he problem here is that the encrypted keys parts are sent to 3 corporations and they can reconstruct your keys.”

The problem here is not splitting the key in 3 parts. That’s actually good! I may or may not be doing that personally as well 🙂
The problem here is that the encrypted keys parts are sent to 3 corporations and they can reconstruct your keys.

— Mudit Gupta (@Mudit__Gupta) May 16, 2023

Changpeng Zhao, founder and CEO of Binance, responded to Gupta’s thread, stating, “So the seed can leave the device now? Sounds like a different direction than ‘your keys never leave the device.’”

So the seed can leave the device now?
Sounds like a different direction than “your keys never leave the device”. ‍♂️

— CZ Binance (@cz_binance) May 16, 2023

Bitcoin (BTC) investor and podcaster Chris Dunn commented, “First they exposed mailing addresses, phone numbers, and email addresses of their customers. […] And now they’ve put a back door into seed phrases. It’s time to say goodbye to Ledger,” referring to the Ledger data breach that compromised users’ information in 2020.

First they exposed mailing address, phone numbers, and email addresses of their customers…
And now they’ve put a back door into seed phrases.
It’s time to say goodbye to @Ledger ✌️ https://t.co/FsZw1jUt6h

— Chris Dunn (@ChrisDunnTV) May 16, 2023

Crypto investor DCinvestor also mentioned Ledger’s earlier data breach that left users vulnerable, stating, “reminder that several years ago, Ledger leaked the name and home addresses for all of their customers via a data breach. [T]he absolute last thing you want on their servers is your private key.”

reminder that several years ago, Ledger leaked the name and home addresses for all of their customers via a data breach
the absolute last thing you want on their servers is your private key https://t.co/z89xxLS6ie

— DCinvestor (@iamDCinvestor) May 16, 2023

Bitcoin investor and entrepreneur Alistair Milne remarked, “Sure, you *could* use Ledger’s new ‘Recover’ service and give them […] your private keys controlling your assets as well as a copy of your ID and other personal information. […] But why then bother with a hardware wallet in the first place?” His comment implied that Ledger’s new recovery service undermines the fundamental purpose of self-custody through a hardware wallet.

Sure, you *could* use Ledger’s new ‘Recover’ service and give them the your private keys controlling your assets as well as a copy of your ID and other personal information…
… but why then bother with a hardware wallet in the first place? pic.twitter.com/ZI39B01gFV

— Alistair Milne (@alistairmilne) May 16, 2023

Related: Ledger data leak: A ‘simple mistake’ exposed 270K crypto wallet buyers

In April, Ledger introduced the Ledger Nano S Plus, a specialized wallet designed for nonfungible tokens (NFTs). The Ledger Nano S Plus aims to enhance user security and provide an improved experience for Web3 users who frequently trade NFTs. This development followed Ledger’s recent incorporation of “clear signing” technology through Ledger Live, further strengthening user security protocols.

Founded in 2014, Ledger has emerged as a significant global entity in the field of hardware cryptocurrency wallets. The company has reportedly sold around 4.5 million wallets and launched six different wallet models.

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