Does Ledger have access to your crypto?

Does Ledger have access to your crypto? Why is there so much noise about upcoming Ledger service offering storing your seed in cloud?

About Ledger

Recently Ledger, leading manufacturer of cryptocurrency hardware wallets announced a new service – “recover your keys using your identity”. The service will allow users to recover their cryptocurrency wallet seed in case of loss. The news made a lot of noise in the crypto & blockchain industry. To explain why, we must understand what is a “hardware wallet”.

The idea of cryptocurrency is to self-host. You, as a user, create a digital wallet, which allows you to manage the cryptocurrencies you “own”. What makes you “own” crypto is just a set of unique, cryptographically secured digital data. This digital data, combined with special software, allows you to create a blockchain transaction, which means that you can send your crypto. As long as you own this unique “digital data” , you are the real owner of your crypto.

To create and send crypto transactions, people use special software, which is most often called a “cryptocurrency wallet”. In fact this software is responsible for storing your unique-digital-data, and using it when you create a transaction. Since unique-digital-data is used to control crypto, it’s crucial to protect it. If you use your smartphone or desktop wallet application – there is a chance that someone can steal unique-digital-data and take your crypto from you (by hacking you). They don’t need your wallet application, they only need unique-digital-data. It’s crucial to understand that exclusive access to crypto is not the wallet application by itself, but the unique-digital-data controlled by this application.

Hardware crypto wallets are some special devices that have one ultimate goal – securely storing your unique-digital-data. These minimalistic devices are designed to be impossible to hack. From a software and hardware point of view (secure element). They became very popular because it is almost impossible to hack it, even if a “hacker” takes your phone or desktop.

The main idea of a hardware wallet is that unique-digital-data NEVER leave the hardware wallet. Hardware wallet uses it to create transactions but shouldn’t allow to extract outside. Ledger service offers the storage of your unique-digital-data on 3th party storage. It will be encrypted, impossible to be used by anyone. But – it kind of breaks that main idea and purpose of hardware wallet which is the foundation of hardware wallet companies, including Ledger.

Ledger users can be almost 100% sure that their funds are still safe. Why almost? Since Ledger software is closed source, their honesty couldn’t be technically proven. And it’s not about their noisy service – the question mark over their legitimacy has been there for years. If you don’t trust them now, you shouldn’t trust them ever.

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