👋 Good afternoon finance enthusiasts and fellow investors!
Did you hear the news from Ledger this week? 🤯
With Ledger Recover, hardware wallet manufacturer Ledger introduces a questionable feature that has the crypto community in an uproar. The damage to the companies image seems inevitable, but what is really behind it?
And should you dump your Ledger?
What's Ledger Recover?
Ledger Recover is a planned wallet feature that has the Bitcoin community scratching their heads, to say the least. The core function of this "security" feature is to split the seed phrase, the secret security key to one's cryptocurrencies, into three parts and store them encrypted in separate companies in a cloud.
Let’s analyze the situation
The feature is optional; no one is required to use Ledger Recover.
👉 At least it’s opt-in not opt-out. But please check the action steps at the end of the email!It costs $9.99 per month.
👉 Yes, per month 😬 But I get the move from a business perspective (recurring revenue).To use Ledger Recover, you have to do KYC.
👉 I don’t like this at all! I like decentralized approaches more, like the concept of social recovery.According to Ledger, all three companies that own the seedphrase shares have strong security measures of their own. If just one of them were compromised, it would be useless to the attackers.
👉 From a security standpoint, that's fairly safe, but when it comes to my cryptocurrency, I don't trust others. I trust myself - because I will not snitch on myself.
👉 The problem I see is that your wallet is connected to your identity, and if the governments wants to get access to your crypto, then they can simply force Ledger to comply.Do I understand the hate against Ledger?
👉 Partly. As always, the truth is somewhere in the middle. Ledger Recover is a opt-in solution, so you don’t have to use it. But on the other hand, the trust of the people is the most important asset if you’re a wallet producer like Ledger.
👉 It’s extremly important to know that the seedphrase will never leave your wallet! Now there are doubts that Ledger has built a backdoor into the already existing wallets.
What does it all mean
Hundreds of investors lose their seed phrase every year, resulting in a total loss of their investment. Ledger Recover. Conversely, this feature goes against the principles that define cryptocurrencies. I firmly believe that you are responsible for your own actions. I want to be in charge because I trust myself the most. Unfortunately, most people in this world do not trust themselves. You can argue about the reasons, but that is the sad reality. Most people prefer an easy life with guarantees and security and pay for it with their freedom.
I myself would never use a service like Ledger Recover, as it goes against everything I invest in cryptocurrencies for. Imagine if the government wants to take away your cryptocurrency. With Ledger Recover they can simply force the three entities holding your seed phrase to hand over parts of the data and they will have access to everything.
I am very sure that in the next few decades, some countries will introduce a wealth registry and if things get really stupid, maybe even a wealth tax. For this reason I have been consciously trying to build up my wealth also outside the traditional system for 3 years now - and I am not the only one who does this. If you want me to dive into this in a later newsletter, let me know.
What to do NOW
I don’t dump my old Ledger, but make sure you do NOT update your ledger to the latest firmware. Let's wait until they provide more clarity or make changes.
If you are concerned that Ledger may have already built a backdoor into their wallet (which I don't believe they have), consider moving your funds to a new wallet.
I recommend having multiple wallets to reduce the risk of losing all your money with a single wallet.
If you don't have a wallet yet, you should definitely get one! It doesn't have to be a hardware wallet, you can also start with a software wallet (which is free). Just make sure you never store cryptocurrencies on an exchange for the long term!
If you are looking for wallets, here are the ones I currently use.
SafePal Mobile Wallet (free app, great for having multiple wallets).
SafePal Hardware Wallet
My old Ledger (I don’t recommend to buy a new Ledger!).
Trezor is also fine, but I don't have one myself.
BTW: Are you interested in diving a little deeper into wallets, seed phrases and how they work (explained in non-technical terms)? Let me know! (just reply to this email).
That’s it for this week! Enjoy your weekend.
Cheers
Stefan
The trust in ledger is lost! Can we have a guide about building wealth outside transactional system.
Ledger betrayed us all, dump it!