- Ledger releases firmware update 2.2.1 with new seed phrase recovery feature.
- Recover is a subscription service that stores user seed phrases online for backup.
- This firmware update requires KYC for sign up.
With the release of Ledger’s latest firmware update, 2.2.1, for the Ledger Nano X hardware cold-storage wallet, crypto users may have no options for a solution to hold their funds in a way that guarantees 100% security. Hot wallet smart contracts have long been compromised to enable easy theft, and cold wallets could also be compromised.
Ledger’s firmware update includes a subscription-based feature entitled Ledger Recover that allows users to recover their seed phrase if lost or forgotten. Signing up for this feature requires KYC, and if customers do so, they will have the option of a backup of their Secret Recovery Phrase provided to them.
Ledger Recover divides a wallet’s recovery phrase into three encrypted shards and then distributes each to three custodians: Ledger, Coincover, and EscrowTech. This approach assures that if a user’s recovery phrase is lost, two of the three shards can be merged, subject to identity verification, to recover access to the secured funds. In essence, Ledger Recover—available for a monthly charge of $9.99—provides an additional layer of security for individuals seeking to safeguard their crypto assets by enabling seed phrase recovery.
The crypto community is outraged at this development as it contradicts the purpose of cold storage and complete self-custody. Users who store their crypto holdings in a cold wallet are responsible for safeguarding their assets. Therefore, forgetting a seed phrase is a necessary risk one must be willing to take when utilizing cold storage for complete autonomy and control of their funds.
In hot and cold crypto wallets, two-way cryptography is used to secure the private key associated with a wallet. A private key is a long, randomly generated string of characters that serves as a password to access a wallet and its contents. A public key is also developed to receive cryptocurrency deposits into the wallet.
Seed phrases are a type of private key used to access cold wallets, which are physical devices that store cryptocurrency offline. A seed phrase consists of a series of random words used to generate the private key for the wallet. The seed phrase is kept offline and is only used to restore the wallet or access its contents in case of loss or damage to the physical device. Hot wallets typically use an encrypted private key stored online. To access the wallet, the user must enter a password or use another form of authentication, which unlocks the private key and grants access to the wallet’s contents.
Ledger Recover must store user seed phrases online to ensure they can be backed up. What needs to be clarified now is if the seed phrases of users who don’t subscribe to this feature will also be stored online. Chances are high that they must be if the option of subscribing is provided to all owners of the Ledger Nano X. Storing seed phrases online for cold wallets undermines their prescribed utility.
