Understanding the Ledger Recover Update

Ledger recently made waves with its new firmware update, dubbed Ledger Recover. This backup option allows users to store their private seed phrases with third-party entities, ostensibly making it easier for users who have misplaced their seed phrases to recover their wallets. The catch? Some users are worried that this could lead their sensitive information into the hands of governments.

The Mechanics: How Does It Work?

When a user decides to opt into the Recover feature, their seed phrase is split into three encrypted fragments, or ‘shards.’ These shards are stored separately with Ledger, Coincover, and a yet-to-be-named backup service provider. This method increases redundancy but raises eyebrows about who can access these fragments.

Gauthier’s Defense: Only for Serious Crimes?

In a recent episode of the popular podcast What Bitcoin Did, Ledger CEO Pascal Gauthier addressed concerns about potential government subpoenas. He argued that any handover of user data would be reserved for serious criminal investigations, like those involving drugs or terrorism. Gauthier quipped, “It’s not true that the average person gets subpoenaed every day.” But how much comfort does that really provide?

Comparing Apples To Oranges: The Coinbase Precedent

Host Peter McCormack didn’t let Gauthier off easily, recalling the 2018 IRS case where Coinbase had to hand over data on 13,000 users. Gauthier promptly dismissed this comparison. He pointed out that unlike Coinbase, Ledger isn’t categorized as a financial institution, thus it faces different legal obligations. Still, one can’t help but wonder if that truly reduces the risk to users’ privacy.

Is the Panic Overblown?

Despite vocal complaints from users and crypto commentators, Ledger maintains that many concerns surrounding the update are exaggerated. A spokesperson reiterated that the core principle of self-custody remains intact, stating, “If you don’t want to use Ledger Recover, nothing changes for you.” So, is the panic justified or overhyped? Only time will tell.

Future Plans: Open Source Aspirations?

When questioned about the chance of open-sourcing their firmware, Ledger responded that legal restrictions currently prevent them from doing so for their secure element chip. However, they expressed commitment to increasing the degree of open-source code available until they reach a level comparable to more widely accepted hardware like the Raspberry Pi.