The Ledger PR Disaster — The end of an Era for Non Custodial Wallets?
Ledger, the Industry leader in Non-Custodial Hardware wallets for storing cryptocurrency has recently kicked up a storm following the announcement of its “Ledger Recover” plan, a solution meant to help users recover their seed-phrase in case they somehow misplaced it.
UPDATE: Ledger Announced a Delay on the Ledger Recovery Plan. Read more here.
This naturally meant that the ledger firmware would be able to retrieve and store an encrypted version of a users’ seed phrase.
The news couldn’t have been met with a more negative sentiment and it’s not an exaggeration when I say that this absolute PR nightmare could spell out the end for Ledger, or similar non custodial storage solutions, or at the very least, fundamentally shake the trust in hardware wallets.
Here’s how we got to this point, and more importantly why it’s such a big deal in the cryptocurrency space.
How we got here
Sometimes, a car accident only becomes evident once it’s too late to avoid. However in the case of Ledger, the monumental mess-up was visible from space, with the naked eye, yet this significant red flag somehow went undetected by the Ledger Executives, who in spite of their better instincts decided to deploy an update that included the Ledger Recover Feature.
Ledger Recover is a subscription-based service that allows users to back-up their seedphrase so they may be able to recover it in case they misplace it. With this update, ledger would effectively extract the seedphrase and split it into three sections. A section is distributed to Ledger, Coincover — a crypto custody firm, and Escrotech, a company that escrows the code.
Therefore, if a user loses access to their cold wallet by losing their private keys, two out of three custodians can combine their codes to recover the wallet’s contents.
The backlash coming from the Crypto community is quite evident: Ledger, and hardware wallets in general, are supposed to offer a “cold storage” solution, to safely store your cryptocurrency. That is — nobody can access your bags, because the wallet is not connected to the Internet. Offering a recovery solution effectively makes this a…