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Stacking Bitcoin over the years is quite easy for a crypto investor. Even easier is losing access to them! Consider this stat – more than 6 million BTC is termed to be lost forever (link).
One of the key tenets of crypto is that investors can own and store the assets in their custom wallets without any dependency on a third party (company, government etc.). This led to the adoption of hardware wallets where investors can store crypto with a 12 or 24 word seed phrase as the key to accessing the assets. Ledger, Trezor, and SafePal are the popular brands that do hardware wallets.
Of course, seed phrases can be lost too. If early investors, who are supposedly the geekier kinds, have lost access to their Bitcoins, how do we expect millions of users to hold without losing them?
Ledger recently announced an optional key recovery service – Ledger Recover. It divided a user’s seed phrases into three parts (encrypted), held by three entities – Ledger, CoinCover, and EscrowTech. Investors can avail it as a backup to access their wallet by paying a monthly subscription fee of $9.99. Sounds great, right?
A Reddit post raised alarm as users read through the text of the latest firmware updates to their Nano X devices and labelled it as “a disaster waiting to happen.”
CZ, the CEO of Binance, also seemed puzzled like most of us.
Source: Twitter
Aside from terming this a money-making initiative, users were left wondering why they needed hardware wallets anymore. The fundamental idea of storing crypto in a hard wallet is to keep your assets secured and that no company can access them with or without your permission.
Permissions are why hardware wallets are preferred over software ones. Software wallets are more prone to online attacks as users sometimes give transfer permissions without their knowledge – this is not possible in hardware wallets.
Then this tweet happened –
One of the support agents of Ledger tweeted that it is technically possible for the company to write a firmware that could extract users’ private keys, while answering to a question raised by one of the users in regards to the newly introduced recover service. Whoa!
This started a frenzy where many users raised concerns over security of their funds held in Ledger devices.
Ledger was quick to react, after the launch proved to be a massive PR disaster. The company insists that its new Recovery tool doesn't compromise wallet security while suspending its launch. Ledger’s CTO, Charles Guillemet, clarified in a new Twitter thread that the wallet’s operating system (OS) requires the consent of the user anytime “a private key is touched by the OS”.
As crypto adoption grows, storage of crypto will be the key to ensuring that a hard-earned portfolio is not lost. All companies, including hardware and software wallet providers, are trying to benefit from this need. Some services, like the Ledger’s recovery tool, are maybe just ahead of its time. While we don’t doubt their intentions, sentiments and how people perceive a brand often play a key role in welcoming new launches.
Already, crypto exchanges play a major role in storing assets globally. However, registered and geo-restricted ones will gain more trust in the future as exchanges work with local Governments by enabling smooth KYC and due-diligence of their investors. In India, registered crypto platforms come under PMLA and are obligated to store your assets safely, similar to traditional banks. If you can trust and store your assets in hardware wallets while understanding the risks, we encourage you to do that. Else, leave the custody to a top Indian platform and only worry about building the portfolio well.
Use promocode TNM51 at www.giottus.com/profile#promo after registration to get Rs.51 worth free Bitcoin.
Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.