Ledger to add seed-phrase recovery option to Nano X

Ledger, the maker of hardware wallets, unveiled a tool that lets users back up their seed phrase to regain access to the Nano X.

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

The decision to use Ledger Recover subscription service is up to the user. The tool splits the Secret Recovery Phrase into three fragments, which are stored encrypted by three separate entities.

If needed, the wallet owner can access the backup of the phrase to recover the private key via identity verification.

“Non-custodial storage remains and will always be our core principle. The idea is that it\’s your choice — you can manage your assets yourself or have a backup with Ledger Recover,” the company stressed.

The feature will launch ‘soon’. According to Wired, the service will cost $9.99 per month, with custodians Ledger, Coincover and EscrowTech. Initially, access will be granted to users in the United States, the United Kingdom, the EU and Canada.

The announcement drew mixed reactions in the community.

“This is a terrible idea, DO NOT enable this feature,” urged Mudit Gupta, Chief Information Security Officer at Polygon Labs.

The expert warned of the risk that encrypted fragments are stored by three firms that could, in theory, reconstruct the keys themselves.

Ledger just released a new update for Nano X that allows social recovery of your seed phrase.

It encrypts your seed in 3 shards and sends it to different entities that can then reconstruct the seed for you post ID verification.

It\’s a horrendous idea, DO NOT enable this feature. pic.twitter.com/H31NHShhyZ

— Mudit Gupta (@Mudit__Gupta) May 16, 2023

“Guys, what are you doing? This is moving quickly in the wrong direction. I would not recommend anyone to upgrade to such firmware,” said the crypto investor going by the handle DCinvestor.

hi @Ledger, it’s concerning your software & hardware wallets will soon be capable of sending a private key across the internet for opt-in sharded backup

wtf are you guys doing? this is going in the wrong direction fast

i would recommend no one upgrade to such firmware

— DCinvestor (@iamDCinvestor) May 16, 2023

The feature contradicts the core value of the company’s product — self-custody of assets.

Co-founder Anton Bukov of 1inch spoke similarly. In his view, Ledger violates the fundamental safety premise for a hardware wallet that “should have no API to expose the seed phrase”.

“OMG, @Ledger is breaking the main hardware wallet security assumption that “it should have no API to expose seed phrase (private key)””

As reported in March, the company announced the expansion of its Series C financing round in the wake of rising sales after the collapse of FTX. Ledger is valued at €1.3 billion.