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Ledger’s New ID-Based Recovery Method Ignites Heated Backlash

Crypto hardware wallet provider Ledger has received some backlash after rolling out a new security feature that allows users to recover their secret recovery phrase.

Called Ledger Recover, the service offers users the ability to link their crypto wallets to a passport or ID card for $9.99, providing another way to “recover” the secret recovery phrase in case it is lost.

The company announced the service on Tuesday, revealing that it is now available for owners of its Nano X wallet.

“When you subscribe to Ledger Recover, a pre-BIP39 version of your private key is encrypted, duplicated and divided into three fragments, with each fragment secured by a separate company – Coincover, Ledger and an independent backup service provider,” Ledger explained on its website.

“Each of these encrypted fragments is useless on its own. When you want to get access to your wallet, 2 of the 3 parties will send fragments back to your Ledger device, reassembling them to build your private key.”

Ledger Recover Ignites Privacy and Security Concerns

Some in the crypto community hit back against the new offering, claiming that it stirs up security and privacy concerns.

Twitter user @sethforprivacy noted that users need to connect their identity to Ledger in order to use the service, which gives “yet another KYC pain-point for data leaks, hacks, and government censorship or surveillance.”

“Not only can leaks or hacks occur, the sales of data on users of Ledger would be extremely valuable now and in the future, and any of the “authorized third parties” could decide to leverage your data as an income stream at any moment.”

Others also mentioned that the feature comes from a company that has already suffered multiple data breaches over the years.

For instance, the crypto wallet provider suffered from a data breach in 2020 that exposed the emails of nearly 10,000 customers.

“Ledger, the company that has experienced multiple security breaches that exposed the personal information of hundreds of thousands of its customers, now wants you to export your private keys from your hardware wallet and give fragments to them, Coincover, and an unnamed third party, where any two can siphon funds,” tweeted ChainLinkGod.eth, a community ambassador for the crypto infrastructure firm, Chainlink.

Ledger Claims There is Demand For Such Service

Despite all the backlash, Ledger remains optimistic about its “recover” product, claiming that there is demand for such a product among new crypto users.

During a Twitter Space session, Ledger CEO Pascal Gauthier said the offering could pave the way for millions of users to join crypto.

“You’re saying this is not what customers want. Actually, this is what future customers want. This is the way that the next hundreds of millions of people will actually onboard to crypto.”

Likewise, Ian Rogers, Ledger’s chief experience officer, noted that the feature is completely optional, suggesting that users who are concerned about its security and privacy implications could avoid it.

He also emphasized that the company was transparent about partnerships with third-party custodians. “As a consumer, you have a choice. And you should know who it is that you’re trusting.”

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