Ledger hardware wallet offering custody for seed backups

[mendace]

A lot of people are smashing their ledgers into pieces when they announced a service to custody people’s seeds. This sparked outrage because it makes it possible for the secret seed to be extracted from the device.

A year ago or so they claimed it’s impossible for the seed to leave the device and now they are claiming it’s possible.

No funds were stolen but it seems that hardware wallets aren’t as safe as people assumed. The biggest issue here is that it’s not open source and no one can verify if it’s actually secure.

What are your thoughts?

Which seems to me a very stupid move by ledger since up to now he has always said the opposite, the fact is that even the other hardware wallets that have open source software actually have the firmware of the closed secure element, this is quite normal because you don't want to reveal the cards on the table to avoid attacks but I repeat that what the ledger wants to do is not scary for me, i.e. the backup or the extraction of the seed which at this point is clear that it can be extracted but the fact that it wants storing seeds on different providers and these are all exposed to the network, so since ledger doesn't have a good reputation in data retention this is what scares me the most

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[livingfree]

AFAIK, this is still on the beta phase and Ledger's community and customers feedback isn't as interesting as it may seem and it's the opposite of the probable respond they'll get.

I hope they listen to their community and revert back to the original idea and kick out the person who suggested that idea. 

I hope so too.

It's going to put their sales into the pit and downhill if they ever will continue this even if it's visible that the community don't like this update that they've made.

We understand that they're a business but still it's important for them to retain that values that they've started with and the actual purpose why people are buying their products but not with this newest ones that they've got.

[Doan9269]

A lot of people are smashing their ledgers into pieces when they announced a service to custody people’s seeds. This sparked outrage because it makes it possible for the secret seed to be extracted from the device.

A year ago or so they claimed it’s impossible for the seed to leave the device and now they are claiming it’s possible.

No funds were stolen but it seems that hardware wallets aren’t as safe as people assumed. The biggest issue here is that it’s not open source and no one can verify if it’s actually secure.

What are your thoughts?

Which seems to me a very stupid move by ledger since up to now he has always said the opposite, the fact is that even the other hardware wallets that have open source software actually have the firmware of the closed secure element, this is quite normal because you don't want to reveal the cards on the table to avoid attacks but I repeat that what the ledger wants to do is not scary for me, i.e. the backup or the extraction of the seed which at this point is clear that it can be extracted but the fact that it wants storing seeds on different providers and these are all exposed to the network, so since ledger doesn't have a good reputation in data retention this is what scares me the most

How can a non custodial hardware wallet perform the function of a custodial wallet and yet expect people to make ise of such, we aren't novice anymore, at least by now the whole experience of what is happening that people are loosing their asset to the hands of custodial exchanges should habe taught us enough lessons to avoid anything that has to do with custody of what belongs to is with another party, I've also seen a centralized exchange claiming they are building a decentralized exchange wallet for it users, what a mistery, we have to be careful because they are painting black as white for us and we should not accept such or fall in for such.

[Fivestar4everMVP]

In as much as I've always considered and recommended ledger and it's competitor company(trezor), to be the best type of wallet to store bitcoin and other crypto currencies since they are offline wallet, I've never owned any of this hardware wallet, and I do not have any plan of buying one any time soon, as I have been using mycelium and electrum wallets since 2016 and never encountered any issues, I simply have not seen a need to purchase a hardware wallet..

And this update of them providing a service that could backup user's seed phrase in the cloud indeed raises concern as to whether the hard ware wallet are truly secure and decentralized as people thought, this is a question only the company themselves can answer.

[DoublerHunter]

What are your thoughts?

Thoughts? Simple.

Don't update your firmware if you already own a Ledger, don't buy a Ledger if you don't own one. Buy a Trezor, preferably a Trezor One because it has lower attack vectors.

We can't trust a company which was breached in the past before. Plus how can we verify that they haven't already backdoored their devices?

^ With this announcement, that is definitely right, never use them at all.
The fact that just a year ago, the company claimed it was impossible for the seed to leave the device, but now they acknowledge its possibility, has further fueled the controversy. However, there is no funds have been stolen so far, but this incident has highlighted the potential vulnerabilities of hardware wallets, which were previously believed to be highly secure and we have a wrong thought.
From now on, I will not recommend that wallet at all.

[hd49728]

In as much as I've always considered and recommended ledger and it's competitor company(trezor), to be the best type of wallet to store bitcoin and other crypto currencies since they are offline wallet, I've never owned any of this hardware wallet, and I do not have any plan of buying one any time soon, as I have been using mycelium and electrum wallets since 2016 and never encountered any issues, I simply have not seen a need to purchase a hardware wallet..

Trezor is not a perfect hardware wallet too especially you have to spend money to buy Trezor wallet. It's not free at all and it is not much better than Ledger. They cooperated with Wasabi to spy transactions and do censorship. I don't like it with a wallet I have to pay expensive cost to buy.

[LIST] Open Source Hardware Wallets. They are not perfect hardware wallets too but I like them more than Ledger or Trezor.

You can use multi-sig wallets with Bitcoin Core, Electrum as alternatives for hardware wallets.

If you need wallets for tokens, you can use Safe wallet with multi-sig wallet.

[adaseb]

Whether you opt to use the service or perform the upgrade isn’t the issue. The issue is that the way the device was designed was poorly because it shouldn’t be possible to extract the seed with a firmware upgrade which gets sent over the internet.

That seed should of never been able to leave the device. But we learnt that it’s not the case here. What if there is some fake software upgrade and people upgrade theirs and get their crypto stolen since it’s possible to extract the seed. What’s the point of the hardware wallet. Might as well stick with electrum.

[yudi09]

^ With this announcement, that is definitely right, never use them at all.
The fact that just a year ago, the company claimed it was impossible for the seed to leave the device, but now they acknowledge its possibility, has further fueled the controversy. However, there is no funds have been stolen so far, but this incident has highlighted the potential vulnerabilities of hardware wallets, which were previously believed to be highly secure and we have a wrong thought.
From now on, I will not recommend that wallet at all.

Many parties were indeed surprised by Ledger's statement via a tweet made by the @Ledger_Support account on May 17, 2023 which has been deleted.
Of course, tweeting will give birth to various negative assumptions because it will have an impact on wallet security. Even other hardware wallets like Trezor have taken a swipe at Ledger for this statement.

Ledger has provided clarification regarding the surprising statement regarding the firmware.
Maybe some of us already know about the news about the contents of Ledger's clarification about the firmware.

Guillemet states that the wallet’s firmware, or OS, is “an open platform” in the sense that “anyone can write their own app and load it on the device.” Before being allowed on the Ledger Manager software, apps are first evaluated by the team to make sure that they aren’t malicious and don’t have security flaws.

According to Ledger, even after an app is approved, the OS does not allow it to use the private key for a network it isn’t made for. The company raised the example of Bitcoin apps not being allowed to use the device’s Ethereum private keys and vice versa for Ethereum apps and Bitcoin keys. In addition, every time a private key is used by an app, Ledger says the OS requires users to confirm their consent to use the key. This seems to imply that third-party apps installed on Ledger shouldn’t be able to use a person’s private key without the user first consenting to its use.

[WeThePe0ple]

It’s a disgrace to be honest, I have to wonder if this is some kind of regulatory pressure from governments. I just can not believe they would implement something like this.

Of course it is. I never invested in BTC a decade ago because I believed that governments would find a way to fight back against it.

I described the way they would do this as follows:

- Prison sentences for known holders of BTC. There are many varieties to this. For example my EU citizens now have to declare BTC holdings on their tax declaration forms. Not declaring this could have prison sentence as a consequence in the future. Or confiscation of other assets
- Taking down exchanges (lawsuits against Binance and Coinbase now happening)
- Attacking hardware wallet companies. We all thought this was impossible. Now we witness that it is not.

I wonder what Trezor is going to do. It won't be long before governments come knocking on their door. I can't imagine any of those companies surviving their regulations. And if they don't comply now, surely they will be taken out of business in the future.

I'm not tech savvy enough to understand if buying a device (either Ledger or Trezor) allows us to safely store BTC if we do not update any software (ledger live app, for example) for an entire decade. I can't imagine trading to be easy unless you constantly go through exchanges (which are under attack) or you constantly use apps (Ledger Live) which can only continue if you update it.

[WeThePe0ple]

Whether you opt to use the service or perform the upgrade isn’t the issue. The issue is that the way the device was designed was poorly because it shouldn’t be possible to extract the seed with a firmware upgrade which gets sent over the internet.

That means we were all lied to from the beginning.

[Synchronice]

The more I think about this announcement, the more shocked I get. This literally means that Ledger, its partner companies and governments will know the identity of hardware wallet owners and in case there is a need, they can seize funds of any of their user.
This move can change the situation for whole crypto market, I'm happy that critics come from every corner towards Ledger, wonder if there is a statement about this from Trezor and other companies in near future.

Every Ledger owner should immediately change their hardware wallet or find a different way to store their coins. I genuinely believe that there is a high chance that planned or accidental data breach may happen and everyone will lose their coins, nothing to say about compromising of your identity.

I'm finally confident to say that when it comes to bitcoin wallet creation, I prefer to stick with my very old computer than with any modern hardware.

What will be the assurance that the change to another hardware wallet won't make same announcement later?
I think this is a more penetrative means by government to get to the root of identifying every individual portfolio and wallets.
One thing that never fails to beat my imagination is that new wallets would be created by genius minds who have come to embrace the anonymity that crypto currency has offered.
Unless, no one is made an example of by the hardware wallet's new policy, then persons would opt for means to prevent their seed from being backed up by the wallet, as a prerequisite for limited storage of their coins.

At least it's a better idea to move from them as soon as possible, what other options do you have? Stay with them? Ledger has said that it's designed in a way that it's impossible for the seed phrase to leave device but as you see, it doesn't work like that.
You'll never be 100% sure whom to trust but when something becomes clear, you should act accordingly.
Btw this Ledger accident can become a good opportunity for others to start a bitcoin hardware wallet business and increase the competitiveness and this is a perfect time for someone to come up with better security and with more proofs.


Am I the only one who feels a little confused? They say that they backup your seeds but at the same time they say that they don't backup your seeds

https://twitter.com/Ledger_Support/status/1658824402694283267?cxt=HHwWhoC9tayAqoUuAAAA

If you choose to pay for a subscription of Ledger Recover, you will need to consent on your Ledger authorizing the duplication, encryption, sharding of your SRP.

Ledger acts as backup provider for only one encrypted fragment, and a single fragment doesn't allow the SRP to be recovered.

Ledger cannot access any user’s SRPs, nor will it be able to do so at any point in the future.

[DexHaer]

The thing is, its not open source and nobody knows if getting the costumer seed will be available from the firmware update when it comes out or our seeds is already in ledger company possession for years.
I dont think people who will keep using ledger are smart people.
What if crypto gets banned or makes huge lawsuit for LEDGER and government intercepts these companies assets and gets all the assets. Gold was confiscated too, who knows what happens in future.
Also what if btc you own is from some illegal activity? FBI or other agency will come and Ledger will have to cooperate, like all companies have to cooperate with law enforcement. Will be bye bye your holdings and will be tied to your identity.

I think move away as quick as possible and never look back to it.

[Z-tight]

- Prison sentences for known holders of BTC. There are many varieties to this. For example my EU citizens now have to declare BTC holdings on their tax declaration forms. Not declaring this could have prison sentence as a consequence in the future. Or confiscation of other assets

I don't live in the EU and i don't know about their tax laws, but i know governments cannot sanction, confiscate assets or require information from users who trade on decentralized platforms and use self custody wallets. Centralized exchanges and services are data farms, and the government can require any information from them or from their users or confiscate assets kept in them.

- Taking down exchanges (lawsuits against Binance and Coinbase now happening)

Governments don't have to "track" centralized exchanges, they comply with them, the charges you read against Binance and a few others is because of how shady they are and how they want to make profit at all cost.

- Attacking hardware wallet companies. We all thought this was impossible. Now we witness that it is not.

I don't think the issue with Ledger has anything to do with the government attacking them, this was their decision because they want to make money or because they have forgotten the basic operational security of BTC assets, both Ledger and Trezor are now bad recommendations, there are better alternatives, or just set up your own air-gapped or cold storage wallet.

[JamesDaniel90]

At the moment it only affects those who have a ledger nano x and you also have to opt into it.

If you do not have a nano x and don't opt into it then I would worry too much about it for now.

[DexHaer]

At the moment it only affects those who have a ledger nano x and you also have to opt into it.

If you do not have a nano x and don't opt into it then I would worry too much about it for now.

How do you know that? Because Ledger said so?

[JamesDaniel90]

At the moment it only affects those who have a ledger nano x and you also have to opt into it.

If you do not have a nano x and don't opt into it then I would worry too much about it for now.

How do you know that? Because Ledger said so?

Well yes that is what they say it is exclusively for nano x.

It is not good news for anyone holding a ledger but I wouldn't stress about it too much just yet.

[yudi09]

What if crypto gets banned or makes huge lawsuit for LEDGER and government intercepts these companies assets and gets all the assets. Gold was confiscated too, who knows what happens in future.

Those of us who act as asset owners who store in hardware wallets only need to store seed phrases as securely as possible. What is it for, to ensure that one day we can recover assets to another hardware wallet.
Isn't it that Bitcoin asset owners who store in Ledger can still ignore the Recover feature.

Also what if btc you own is from some illegal activity? FBI or other agency will come and Ledger will have to cooperate, like all companies have to cooperate with law enforcement. Will be bye bye your holdings and will be tied to your identity.

I think move away as quick as possible and never look back to it.

IMO, thinking as fast as possible can sometimes be useful and sometimes not. But the over-concern about Bitcoin because of this problem in my opinion needs to slow down a bit to be able to compartmentalize the problem.

[Z-tight]

At the moment it only affects those who have a ledger nano x and you also have to opt into it.

If you do not have a nano x and don't opt into it then I would worry too much about it for now.

Ledger is no longer a recommended hardware wallet only because this option is available, it doesn't matter if you have to have to opt into it or not, the option is terribly flawed, and a bad option that should not be available, because people with bad operational security may opt into it and lose their funds in the future. E.G there are software wallets like coinbase wallet that gives their users the option to back up seed phrase to cloud, and that is one of the many reasons why this wallet isn't recommended.

[Wind_FURY]

People are making a huge deal about something that is not nearly as big as it is being sold to the misinformed. This added recovery feature, come as a subscription option and you have to pay for that, so not a lot of people are going to opt-in for that extra feature.

We know Ledger were hacked a few years ago.... and a lot of people's information were stolen.. then criminals used that data to launch targeted Phishing attacks on those clients.... so why will people trust them now?  

The same viewpoint! How could we truly trust a company that's suffered a breach before? It's just fair warning for users to be careful, because what Ledger has technically done, is they backdoored their devices. Plus I will say it again like a broken record, "How can we really verify that their ability to backdoor isn't already there"?

But you're also right. Everyone is making the issue bigger than what it is. Anyone who doesn't like Ledger's update should buy a Trezor.

[taufik123]

The same viewpoint! How could we truly trust a company that's suffered a breach before? It's just fair warning for users to be careful, because what Ledger has technically done, is they backdoored their devices. Plus I will say it again like a broken record, "How can we really verify that their ability to backdoor isn't already there"?

But you're also right. Everyone is making the issue bigger than what it is. Anyone who doesn't like Ledger's update should buy a Trezor.

Even users have lost trust in Ledger. Wallet hardware does not really protect when Phrase can be extracted from the device and this is like a wide backdoor that can be an easy gap for hackers to take advantage of.

They even used the help of a third party, Coincover, to do identity verification so that they could easily restore Phrase using their own identity.

This is also an issue of privacy, users have to give up their personal data to use recover.
No more Ledge Non-Custodial, no more Ledger for the best wallet Security.
We no longer have full control, and now starting to leave Ledger and move to Trezor is the right choice.