Ledger postpones launch of controversial seed phrase recovery service

Ledger, a popular hardware wallet provider for cryptocurrencies, has postponed the launch of its key recovery feature due to backlash from the cryptocurrency community.

The seed phrase recovery service, called Ledger Recover, allows users to securely store encrypted backups of their seed phrases with three custodians. This enables users to recover their private keys if they lose their seed phrases.

However, critics raised concerns about sharing seed phrases with external entities, which contradicted Ledger’s emphasis on the exclusivity of private keys stored on the device. Ideally, once a user is given a seed phrase, the company should not be able to store the seed phrase in any shape or form. The seed phrase is the only way the user would be able to access the wallet and is an effective method to secure the wallet from hackers.

Understandably, critics voiced their concerns on social media, feeling betrayed by the perceived breach of trust. They highlighted potential risks, such as hacks targeting custodians, data leaks from Know Your Customer (KYC) providers and the possibility of law enforcement accessing users’ data stored by Ledger.

I want to address the feedback over Ledger Recover, the way it was communicated, and share our path forward. Read my letter and join our town hall with our leadership team to learn more.

🧵👉 https://t.co/2hlPrMwzaN pic.twitter.com/juVBOpWeeG

— Pascal Gauthier @Ledger (@_pgauthier) May 23, 2023

Another issue was the closed-source nature of the Recover feature’s code, preventing independent verification of its security. Unlike some competitors, Ledger did not publish all of its code but relied on a selected team of security researchers.

In response, Ledger acknowledged the concerns and committed to open-sourcing parts of its code. Ledger CEO Pascal Gauthier, in a letter to users, announced an expedited open-sourcing roadmap, starting with core components and the Ledger Recover feature. He stated that the controversial feature’s launch will be delayed until this process is complete.

Ledger Community: We've heard your feedback on Ledger Recover.

To share an update and discuss the top items we heard, we're holding a town hall with our leadership team @_pgauthier, @iancr, @P3b7_, & @BTChip on Tuesday at 6:30pm CEST/12:30pm EST.https://t.co/qfhxPKbHjk

— Ledger (@Ledger) May 22, 2023

The company is also organising a “Twitter Spaces” session on Tuesday to discuss the issue with various stakeholders.

In his letter, Gauthier emphasised the importance of providing key recovery services to attract users struggling with self-custody. Ledger aims to offer user-friendly storage and security options to address these challenges.