Ledger Recovery - Send your (encrypted) recovery phrase to 3rd parties entities

[RickDeckard]

If anyone is wondering how can an entity destroy the concept of their own products - in this case by exporting the seed phrase to outside entities, even if it is encrypted - then wait no more because Ledger will launch their new service, Ledger Recover[1]:

Ledger is preparing to launch a new service called Ledger Recover that splits a wallet recovery phrase—basically, a human-readable form of the private key—into three encrypted shards and distributes them to three custodians: Ledger, crypto custody firm Coincover, and code escrow company EscrowTech.  If somebody loses their recovery phrase, two of the three shards can be combined—pending an ID check—to regain access to the locked funds. Essentially, Ledger Recover is an additional safety net; for the price of $9.99 a month, it takes the jeopardy out of crypto’s version of stuffing dollars under the mattress. It’ll be available in the UK, EU, US, and Canada and come to other territories later in the year.
(...)
Ledger Recover is a service, he says, not a feature—one that provides all the niceties and safety mechanisms regular people are looking for. The fragments of the recovery phase are encrypted and stored by each custodian on specially secured servers, and the balance of the user’s wallet is covered up to a value of €50,000 ($55,000) if something goes awry, a little like deposit insurance at a bank. It’s also being designed with a less technical user in mind.

I've tried to look upon any more news regarding this paid service, but so far I'm not able to find anything on Ledger website (release notes are currently on OS version 2.1.0). The only reference that I found was this[2] Reddit post where the concept appears in Ledger Nano X newest firmware update (2.2.1):

I believe most Ledger customers will see this as a service to subscribe to since this will be seen as a "safe heaven" in order to avoid the loss of their funds, or even an alternative that holds their hand and makes them feel safe regarding their funds. Sadly they aren't aware of what is actually happening in the background, but I don't think most people will care as long as they have another option to access their funds...
[1]https://www.wired.co.uk/article/ftx-crypto-investors-hardware-wallets
[2]https://safereddit.com/r/CryptoCurrency/comments/13im3bc/wtf_ledger_this_is_a_disaster_waiting_to_happen/

[mocacinno]

I guess they have released this info on the wrong day... This should have been released on april 1st, since it has to be an april fool's joke.
If this is true, i'll never point people towards ledger hardware ever again... FFS, if this is true, they're completely demolishing everything a hardware wallet stands for...

[RickDeckard]

I guess they have released this info on the wrong day... This should have been released on april 1st, since it has to be an april fool's joke.
If this is true, i'll never point people towards ledger hardware ever again... FFS, if this is true, they're completely demolishing everything a hardware wallet stands for...

Just the idea that someone from the higher executive board actually thought that this was a good concept to be implemented, baffles me and it goes to show that they don't care at all about the concept behind Bitcoin. To make matters worse, they also bundled this service with KYC procedures since you'll have to send them your ID/passport in order to use the service, meaning that they successfully surpassed every privacy boundary that they could with this new service at the expense of $9.99 per month. Outrageous...

[dkbit98]

If anyone is wondering how can an entity destroy the concept of their own products - in this case by exporting the seed phrase to outside entities, even if it is encrypted - then wait no more because Ledger will launch their new service, Ledger Recover

What a piece of shit they are!
Just when I thought ledger can't get any worse... they release this ''revolutionary'' stupid idea  
Let me guess what happened here, someone with big capital invested a bunch of money in one of their several seed round funding (last one was in 2022 I think), and now those investors want to profit and get money back with this ''deal''.
Everything around ledger is closed source, but they ask us to believe them that everything will be safu encrypted and sent for safu keeping, they can't be serious...
€50,000 ($55,000) is covered and safu says the people from ledger, oh c'mon man, give me a break!

It's finally time to stop using ledger and switch to other open source alternatives, maybe even making your own DIY device or getting back to old laptop/phone as a cold storage.

PS
Just reading all the ledger reddit and twitter posts now... and oh boy customers are pissed, confused and very angry about this ''news''!  

[FatFork]

Yeah, Ledger keeps finding ways to disappoint us. I'm still trying to wrap my head around this whole thing.

So, let me get this straight: they're gonna take our recovery phrase and split it up, sending encrypted pieces to these custodians without giving us a choice? And to make matters worse, they're gonna offer a KYC-based recovery process only for those who cough up the dough for this service? Seriously, if this is for real, they deserve an instant boycott! What a major letdown.

[ABCbits]

This is so bad that i might give them negative feedback if they have account on this forum. And considering this "feature" require ID verification where Ledger already leak user data in past, it feels like disaster waiting to happen. By disaster, i mean your legal document will be leaked and misused by criminal to perform identity theft.

[o_e_l_e_o]

So the very fact that this exists, even if you don't sign up for it, means that the next firmware update for Ledger devices will create a process by which your seed phrase is extracted from your hardware device, downloaded on to your computer, and then sent across the internet. That is a massive attack vector. It negates literally the entire point of a hardware wallet to keep your seed phrase and private keys isolated from computers and the internet. Not to mention this gives governments a very easy path to seizing all your assets, if they want, and allows all your coins to be stolen with some very basic social engineering. If you have completed KYC anywhere ever, then you've given away all an attacker needs to recover your seed phrase and empty your wallets.

Remember when Trezor and Ledger were the two best hardware wallets out there, and every thread had people (me included!) recommending either/both of them. How the mighty have fallen! Both are complete and utter trash now, completely ruined by awful decisions such as this one. Seriously, do the management teams behind both wallets understand nothing about bitcoin?

More and more I am glad that I have moved pretty much exclusively to airgapped, encrypted, cold storage for the bulk of my bitcoin. I know that my wallets will never suddenly pose a massive security and/or privacy risk out of the blue because of some absolutely moronic decision by a third party trying to squeeze more and more profits out of their customers.

[Charles-Tim]

I do not know why some people like telling people that Ledger Nano wallets are good, they should not have been trusted from the first day they created wallets in the past, because all their wallets are having close source secure elements. If you can not verify, why trust the company when there are some alternatives that everything about their wallet makeup are open source.

Another thing is that Ledger proved themselves not to care about their customers personal information. This two are enough not to use Ledger wallet again. I use to tell people to use the wallet before, but as I found about the wallet more on this forum, I know it is one of the wallets that I can not point people to again to use.

What I saw today is not surprising me, Ledger do not care before about how bitcoin should be, as it should be of no trust. Not taking care of users data and now they have promoted to a level where privacy will be no more. People should avoid Ledger wallets.

[NotATether]

If anyone is wondering how can an entity destroy the concept of their own products - in this case by exporting the seed phrase to outside entities, even if it is encrypted - then wait no more because Ledger will launch their new service, Ledger Recover[1]

Just wait until quantum computers take the industry by storm, and suddenly the Ledger company has to scramble to shut down that service and delete all
backups before the encryption is cracked by a hacker.

This basically means: "Here, you can get your coins back, but first we need to perform an automated KYC check" - most likely with some stupid and flawed 3rd party identification software that can't even recognize a passport if you shove it under your camera lens. To say nothing about the risk of identity theft.

[RickDeckard]

(...)If this is true, i'll never point people towards ledger hardware ever again... FFS, if this is true, they're completely demolishing everything a hardware wallet stands for...

While these particular release notes do not appear on Ledger website, you can find them in Ledger Servers API[1] and, most importantly, /u/btchip - Ledger Co-Funder - has already admitted that this will indeed happen[2] setting a dangerous attack vector as o_e_l_e_o previously explained about:

The device sends encrypted shards of your seed to different companies if you decide to use the service. You can of course still choose to backup it yourself.

I wonder until how long will someone find an exploit to this "encrypted backup export system"? If this doesn't spell the depreciation of Ledger as a company, for sure that event will.
[1]https://manager.api.live.ledger.com/api/firmware_osu_versions
[2]https://safereddit.com/r/ledgerwallet/comments/13itm7u/is_there_a_backdoor_yes_or_no/jkbyyfp/

[Sp0ke]

Wait.... Just bought a Ledger wallet a week ago. I have some ETh inside. Should i take them off? Is it unsafe ?

[NotATether]

Wait.... Just bought a Ledger wallet a week ago. I have some ETh inside. Should i take them off? Is it unsafe ?

This is a paid feature so it's not sending your seed phrase anywhere unless you pay $9.99 per month for it (which is a dumb subscription).

[DaveF]

You can't fix stupid.
But beyond that, take everything else away.
Say it's done 100% perfectly, secure, safe and everything else. You are now paying $120 a year to save your seed. Fine, great.

What happens in 3 or 8 or 15 years if they go out of business and properly purge all their data. It's just as useless as not having it in the 1st place.

Seed plate in a secure spot and done. Is it really that difficult?

Not your keys, not your coins. Give your keys to someone else....not your keys anymore.

-Dave

[Sp0ke]

This is a paid feature so it's not sending your seed phrase anywhere unless you pay $9.99 per month for it (which is a dumb subscription).

Pf.... that's relieving. Why did they expose themselves like that ?
So it's that subscription that is exposing the keys ? You subscribe there in order to backup your keys? I rather save them in my place to be honest and noone has access in them. As long as i dont buy this sub i'm fine right ?

[o_e_l_e_o]

This is a paid feature so it's not sending your seed phrase anywhere unless you pay $9.99 per month for it (which is a dumb subscription).

It's still unsafe.

The whole point of a hardware wallet is to store your seed phrase and private keys safely and securely inside and prevent them from being extracted. The whole point of Ledger's secure element is that there is no possible way to extract the seed phrase from it. Now we have just discovered that a simple firmware update will permit the secure element to start sending your seed phrase across the internet. Ledger have just admitted that their entire design is deeply flawed.

We conveniently already have a name for a hardware wallet which can expose your seed phrase to the internet. It's called a hot wallet.

[Pmalek]

I haven't read anything this stupid since Square's concept of shared self-custody. But Ledger was faster and actually worked on developing and releasing this bullshit before Square. They really will use any opportunity to try and profit, no matter what. If this turns out to be a success, this generation doesn't deserve Bitcoin.

So, let me get this straight: they're gonna take our recovery phrase and split it up, sending encrypted pieces to these custodians without giving us a choice?

All correct except the last part. To become part of their revolutionary seed sharing solution, you have to subscribe to it somewhere, give your consent, and agree to pay those $9.99 per month. So, you don't have to use it. It's just an idiotic option they give you. I wonder why the Nano S Plus isn't mentioned? Maybe we can expect that in the release notes for the new S Plus firmware.   

I do not know why some people like telling people that Ledger Nano wallets are good, they should not have been trusted from the first day they created wallets in the past, because all their wallets are having close source secure elements.

All secure elements are closed-source. Trezor and Tropic Square are the first ones that began experimenting with an almost 100% open-source secure element chip. 

If you can not verify, why trust the company when there are some alternatives that everything about their wallet makeup are open source.

I guess you are talking about Foundation Passport. Foundation is relatively new in this business, so you couldn't have recommended them 5 years ago, at a time while Trezor and Ledger were the best, because they weren't around at that time. Second thing, does Foundation use an open-source secure element? If Trezor is the first one that's planning to develop one, it means Foundation doesn't have one either.   

So it's that subscription that is exposing the keys ?

Yes. if approve it and pay the monthly fees.

You subscribe there in order to backup your keys?

No, you subscribe there for them to back up 2 out of 3 shards of your recovery phrase. If you lose your own, the 2 shards stored by 3rd-parties are supposed to allow you to backup your wallet.

[The Sceptical Chymist]

If this is true, i'll never point people towards ledger hardware ever again... FFS, if this is true, they're completely demolishing everything a hardware wallet stands for...

Just to address the above statement only: if you can live with Ledger's closed-source code, it's still a good wallet that doesn't require buyers of it to have their private keys split up into shards and placed into other people's hands.

The first thing that popped into my head was that this "service" would make it incredibly easy for governments/law enforcement agencies to seize assets from anyone who uses it, as I'm sure none of the three parties in control of the shards would defy court orders--and who knows, they might even give up the info without such an order.  That's the problem; you don't know what's going to happen when you're not in control of your private keys.

Ugh.  This is fucking awful.

[Aikidoka]

~snip~

Seed plate in a secure spot and done. Is it really that difficult?

Not your keys, not your coins. Give your keys to someone else....not your keys anymore.

-Dave

I agree with your point. Currently storing your bitcoins in a seed plate or an air-gapped device that you personally own is the best and most secure option.

Trust in hardware wallets has become a concern after this, so it's better to keep peace in your mind and use something that you own to store your BTC.

We conveniently already have a name for a hardware wallet which can expose your seed phrase to the internet. It's called a hot wallet.

Indeed, with a simple firmware update the Ledger Nano seems to function more like a hot wallet rather than a hardware wallet that keeps your private keys offline. This shift essentially turns it into a free hot wallet, which is scary since it involves transmitting your seed phrase and wallet information to third-party entities.

I wonder what they're thinking about when they're doing this?

[joniboini]

Holly hell, what is happening with Ledger? Did the owner change hands or something? It feels like they started to make decisions that are profit-driven like what exchange does, without even considering what their product actually is. At the same time, I might be deceived and this is just how they act since the beginning. Looks like it is time to find other manufacturers that sell in my region and ditch Ledger entirely if I need to buy an HW in the future. Hopefully, that would never happen and I can just build my own air-gapped device with ease.

[FatFork]

So, let me get this straight: they're gonna take our recovery phrase and split it up, sending encrypted pieces to these custodians without giving us a choice?

All correct except the last part. To become part of their revolutionary seed sharing solution, you have to subscribe to it somewhere, give your consent, and agree to pay those $9.99 per month. So, you don't have to use it. It's just an idiotic option they give you. I wonder why the Nano S Plus isn't mentioned? Maybe we can expect that in the release notes for the new S Plus firmware.   

I'm still pretty skeptical about all this. Has Ledger put out any official statement or something that says the seed phrase won't be sent anywhere unless we subscribe to their monthly plan? However, even if such confirmation exists, we should still question whether we have any means of independently verifying this claim or if we're simply relying on their word. The mere possibility of the seed phrase leaving the hardware device and potentially being accessible online, in any form, undermines the fundamental purpose of a hardware wallet, which is to serve as the sole custodian of our private keys.

You subscribe there in order to backup your keys?

No, you subscribe there for them to back up 2 out of 3 shards of your recovery phrase. If you lose your own, the 2 shards stored by 3rd-parties are supposed to allow you to backup your wallet.

From what I understand, all three shards are being backed up by either Ledger or third-party custodians. It might not seem like a huge difference, but it does make the whole process a bit less secure. With three pieces of information "out there", if someone gets their hands on just two of them, they could access your coins.