ledger

Ledger hardware wallet adds DeFi tracking feature

The Ledger Live app, which pairs with Ledger hardware wallets, integrated a new DeFi tracking feature to monitor performance analytics of over 1,000 protocols.

Users and developers are seeking out ways to stay both safe and informed after a year of volatility and uncertainty. During this shift, the hardware wallet developer Ledger announced a new integration for users to track the value of their assets.

Ledger and Merlin, a decentralized finance (DeFi) portfolio tracker, announced their new partnership on Dec. 13 to bring live DeFi performance analytics to Ledger Live users. The app, which connects to Ledger’s cold storage wallets, services over 5 million users.

The newly integrated DeFi tracker connects over 1,000 DeFi protocols across ten blockchain networks. Users will have access to performance metrics and profits and losses reports, along with aggregated reports of gas spent and calculated yields.

Elie Azzi, co-founder and chief product officer of Merlin by VALK, told Cointelegraph how this compiled data helps investors better navigate everything at their disposal:

“It is a challenge for them to compile all their trading data without connecting to each individual platform, multiple times, which can expose them to risk.”

Azzi continued to say that the major hacks and scandals of the last year have shown us that the crypto space has been compromised from its initial decentralization.

As the space picks itself up, both users and companies are looking to reinstate decentralization with transparency as building blocks:

“There has never been a stronger argument for DeFi, and for open, transparent and trustless solutions, upon which crypto has always been fundamentally built.”

Additionally, the new feature from Merlin will allow investors to claim liquidity provider fees and rewards straight from the interface without the need to exit the platform.

Jean-François Rochet, the vice president of international development at Ledger, said all of these new integrations help streamline the user experience.

After the collapse of FTX, many users in the crypto space began looking toward hardware wallets as part of their strategy to keep their assets more secure. Trezor, a hardware wallet provider, reported a 300% surge in sales revenue after the incident.

Many major players in the space, such as Binance CEO Changpeng “CZ” Zhao and Ethereum co-founder Vitalik Buterin, encouraged self-custody over the last month.

Binance Labs also made a strategic investment in a hardware wallet firm and looks to lead its upcoming Series A funding round.

Crypto Biz: Is Goldman Sachs the ultimate crypto contrarian?

Is the U.S. investment bank looking to buy up distressed crypto firms amid the bear market?

One of the oldest pieces of contrarian investment wisdom is to buy when there is blood in the streets. If it were that easy, crypto investors would be euphoric at all the buy opportunities right now. If you’re rattled by the bear market, which has been especially brutal even by crypto standards, don’t beat yourself up over it. Cryptocurrency is still an unproven asset class that operates in the shadow of regulators. I don’t blame you for not buying an asset class that’s down over 70% this year.

With those caveats in mind, a quiet herd of smart money investors believes that now is the best time to invest in Bitcoin (BTC), digital assets and crypto infrastructure companies — even after the monumental collapse of FTX. Although nothing is confirmed yet, United States investment giant Goldman Sachs is also signaling that crypto is evenly priced after the year-long bear market.

This week’s Crypto Biz explores Goldman’s intrigue with crypto, a new cold wallet design from Ledger, Blockstream’s plunging valuation amid the bear market and the latest news surrounding Three Arrows Capital.

Goldman Sachs reportedly looking to buy crypto firms after FTX collapse

Goldman Sachs’ embrace of crypto appears to be growing, even during the bear market, as the U.S. investment behemoth looks poised to acquire distressed firms in the wake of FTX’s collapse. In an interview with Reuters, Goldman executive Mathew McDermott said crypto companies are “priced more sensibly” today than they were over a year ago and that calls to regulate the industry will ultimately be a positive catalyst for adoption. Although FTX has become the “poster child” for crypto, and not in a good way, the underlying technology behind the industry “continues to perform,” McDermott said.

‘Father of the iPod’ helps Ledger create new cold crypto wallet

The collapse of centralized platforms has been a boon for Ledger, the hardware company known for providing cold-storage crypto devices. After an influx of new orders for its Ledger Nano devices, the hardware company announced this week that it has partnered with Tony Fadell, the inventor of the iPod Classic, to design its newest wallet device. The new wallet, known as Ledger Stax, is said to be about the size of a credit card and features a large E Ink display, wireless charging and Bluetooth support. Remember: Not your keys, not your Bitcoin.

Blockstream raises funds for mining at 70% lower company valuation

Bitcoin infrastructure company Blockstream is reportedly looking to raise fresh financing — but it, too, acknowledges that won’t be easy during a bear market. The Adam Back-led company is prepared to raise capital at a valuation of less than $1 billion, which is 70% below its $3.2 billion valuation in August 2021. According to Back, the additional financing will go toward scaling the company’s mining capacity. As Cointelegraph reported, Blockstream is working with Jack Dorsey’s Block to develop a solar-powered Bitcoin mining facility in Texas.

3AC subpoenas issued as dispute grows over claims of Terraform dump

The disgraced founders of Three Arrows Capital, Su Zhu and Kyle Davies, will be required to give up financial information related to their failed hedge fund, a federal judge has decreed. The approved subpoenas to be delivered to the founders require that they give up any “recorded information, including books, documents, records, and papers” in their custody relating to 3AC’s financial affairs. Once valued at $10 billion, 3AC essentially blew up in the wake of Terra Luna’s infamous death spiral earlier this year. Arrogant as they once were, Zhu and Davies were exposed for a series of horrendous trades that eventually bankrupted their firm.

Before you go: Bitcoin hits $17K — Bull trap or relief rally incoming?

Bitcoin’s price has been fairly stable over the past few weeks, even as the FTX contagion continued to spread. The flagship digital asset scraped above $17,000 earlier this week, raising cautious optimism that the worst of the market downturn has passed. In this week’s Market Report, I sat down with Marcel Pechman and Joe Hall to discuss whether BTC can expect a relief rally soon. I also broke down the so-called “Santa Claus” rally, which many expect to play out later this month. You can watch the full replay below.

Crypto Biz is your weekly pulse of the business behind blockchain and crypto delivered directly to your inbox every Thursday.

‘Father of the iPod’ helps Ledger create new cold crypto wallet

Tony Fadell, the man behind the iPod, iPhone and Nest Thermostat, collaborates with major crypto wallet firm Ledger to build a new cold wallet.

Hardware wallet provider Ledger, known for its cold-storage devices, announced its seventh crypto wallet in collaboration with the creator of the original iPod.

Tony Fadell, the inventor of the iconic iPod Classic model, has partnered with Ledger to help the company design its latest wallet device known as Ledger Stax. The company broke the news on Dec. 6 at Ledger’s bi-annual Web3 developer event, Ledger Op3n, in Paris.

Ledger’s upcoming new hardware wallet is a credit card-size device that features a large E Ink display, capacitive touch, Bluetooth support, wireless charging and more.

For the first time in Ledger’s product line, Stax contains a curved E Ink display which can be used to show the holder’s name or other wallet information, just like a book spine. The device is also equipped with magnets, allowing users to organize the storage of multiple similar devices and “stack” them in order, and that is why Ledger Stax was called so.

When designing the device, Fadell thought about what the modern stack of cash would look like. “He thought about it in two ways — the spine of the device is like the band around the stack of cash which shows you what’s inside, and you can stack them together using the magnets,” a Ledger spokesperson said in a statement to Cointelegraph.

*Ledger Stax hardware wallet. Source: Ledger*

Fadell, who also worked on the first three generations of the iPhone, designed Ledger Stax in cooperation with the industrial design firm Layer. “We need to be user-friendly… no! A ‘user-delightful’ tool, to bring digital asset security to the rest of us, not just the geeks,” the ‘Father of the iPod’ said.

According to the announcement, Ledger Stax will be available in Q1 2023, and customers can now pre-order the wallet on Ledger’s official website. In the future, it will be available from select retailers such as BestBuy in the United States.

The Ledger Stax wallet is priced at $279, a spokesperson for Ledger told Cointelegraph. The device is significantly more expensive than Ledger’s previous wallet, the Ledger Nano S Plus. Officially released in April 2022, Nano S Plus costs $79 at the time of writing. The previous iteration, Nano X, is priced at $149.

According to Ledger, the latest wallet product is designed to make interacting and signing transactions easier with a touch screen and a larger display. “Ledger Stax adds to our lineup, rather than replacing anything, allowing customers to choose the kind of experience they want,” the firm’s representative said.

Binance makes moves in hardware wallet industry with new investment

Binance Labs has made a strategic investment in the Belgian hardware wallet firm Ngrave and will lead its upcoming Series A round.

Cryptocurrency exchange Binance is making a move in the hardware wallet industry. The firm announced on Nov. 21 that its venture capital arm, Binance Labs, made a strategic investment in Belgian hardware wallet firm Ngrave and will lead its upcoming Series A round.

Founded in 2018, Ngrave specializes in self-custody and provides a security suite comprising three major elements: connectionless hardware wallet Zero, key backup tool Graphene and the Liquid mobile app.

Yi He, co-founder of Binance and head of Binance Labs, pointed out that security remains one of the biggest challenges for crypto adoption. “Self-custodial wallets are one of the most secure methods for storing digital assets,” He said, adding that Binance is looking to continue backing startups that enhance user security.

“Binance Labs is excited to capitalize on the emerging hardware wallet sector and partner with Ngrave to bring sophisticated wallet products to both retail and institutional users,” Binance Labs investment director Tyler Z added.

Ngrave is not the first hardware wallet provider in Binance Labs’ portfolio. It previously invested in hardware wallet maker SafePal through its incubation program back in 2018. Binance has also been integrating SafePal’s solution into its platform, adding the SafePal Mini App into the Binance app in October.

In early November, Binance also partnered with hardware wallet maker Ledger to allow Binance users to purchase crypto directly through the Ledger app with their bank cards.

As previously reported, the ongoing crypto winter has accelerated the growth of the hardware wallet industry, while many centralized crypto exchanges have been scrambling to maintain operations. Unlike exchanges, hardware wallets allow users to better control their funds by securing their own private keys. According to data from several studies released in July, the crypto hardware wallet industry could grow at a faster pace than exchanges in the near future.

On Nov. 14, Binance CEO Changpeng Zhao even admitted that centralized exchanges may no longer be necessary as investors shift to self-custodial solutions. “If we can have a way to allow people to hold their own assets in their own custody securely and easily, that 99% of the general population can do it, centralized exchanges will not exist or probably don’t need to exist, which is great,” Zhao said.

The latest news comes shortly after Ledger CEO Pascal Gauthier argued that Binance-owned software wallet Trust Wallet must offer the Ledger Connect option in order to provide better security to its users. “Otherwise it’s just unsafe,” the CEO declared in a tweet on Nov. 13. The connection option essentially allows Trust Wallet users to store their keys on a Ledger device instead of storing them on a mobile phone or a computer.

@TrustWallet @cz_binance is time to offer a ledger connect option to your users. Otherwise it’s just unsafe. (1) https://t.co/AjjGrtBsQ2

— Pascal Gauthier @Ledger (@_pgauthier) November 13, 2022

A spokesperson for Trust Wallet told Cointelegraph that the platform is planning to release its integration with Ledger Connect soon, as the feature is a top priority item. The representative also stressed that Trust Wallet users have “full recoverability” for accessing their funds on a chain as long as they remember their secret phrase or private key.

Trezor reports 300% surge in sales revenue due to FTX contagion

The hardware wallet firm is certain that the latest uptick in demand is a result of investors rescuing their funds in the aftermath of the FTX failure.

Amid growing concerns over centralized cryptocurrency exchanges in the wake of the FTX crisis, investors are increasingly moving to hardware crypto wallets.

A major hardware wallet provider, Trezor, has recorded a major uptick in wallet sales in the aftermath of the FTX contagion, the firm’s brand ambassador Josef Tetek told Cointelegraph on Nov. 15.

Trezor saw its sales revenue surge 300% week-on-week and it’s still growing, Tetek reported, adding that the current sales are higher than a year ago when Bitcoin reached its all-time highs at $68,000. Trezor has also recorded a significant spike in its website traffic, which increased 350% over the same period, the exec noted.

According to Tetek, Trezor is quite certain that the uptick in new wallet users was a result of issues with FTX, a crypto exchange at the center of the latest industry scandal involving the misappropriation of user funds. The spike in demand for Trezor wallets started early last week, exactly when “rumors of the FTX insolvency started circulating,” Tetek reported.

Trezor expects further growth in new users in the near future as the failure of middlemen in crypto would only continue to unfold, Tetek suggested, stating:

“We expect this trend to continue in the short to mid term, as the contagion of FTX failure continues to unwind and Bitcoin or cryptocurrency holders lose trust in custodians and finally start to explore their options to self-custody their digital assets.”

According to the executive, Trezor is able to satisfy current levels of demand in the short to medium term. “Even if sales continue at this elevated rate, we are confident there would be a limited impact on our stock in the longer term, as we were already planning for an uptick in sales,” Tetek said. He also noted that Trezor doesn’t plan to increase the prices for its hardware wallets in line with its vision to make “self-custody accessible to all.”

Despite the spike in demand and the associated increase in support requests, Trezor isn’t planning to expand its hiring. “We did not have to downscale as we were prepared for a prolonged and deep bear market,” Tetek stated, adding that Trezor currently employs a total of 100 people working in multiple locations, with the majority based in Prague.

Cryptocurrency investors have been increasingly moving to self-custody with software and hardware wallets, with exchange outflows nearing all-time highs by mid-November 2022.

Ledger, a major rival hardware wallet supplier, has recorded a significant surge in demand for its devices recently as well. The French cold wallet firm saw one of its highest traffic days ever shortly after FTX stopped all crypto withdrawals last week, triggering inventors to offload their funds from exchanges to cold storage as soon as possible.

Amid the ongoing FTX contagion, even some of the biggest crypto exchanges started promoting the need for self-custody. Binance CEO Changpeng Zhao admitted on Nov. 14 that centralized exchanges may no longer be necessary as investors would shift to self-custodial solutions like hardware or software wallets.

“If we can have a way to allow people to hold their own assets in their own custody securely and easily, that 99% of the general population can do it, centralized exchanges will not exist or probably don’t need to exist, which is great,” the CEO said.

Ledger hardware wallets hit by the FTX earthquake — CTO

Some Ledger users weren’t able to process withdrawals using Ledger Live on Wednesday, according to social media reports.

Hardware-based cryptocurrency wallet provider Ledger has experienced some issues due to massive outflows from crypto exchanges amid the FTX bloodbath, according to its chief technology officer.

Ledger saw a “massive usage” of their platforms and suffered a “few scalability challenges” on Nov. 9, Ledger chief technology officer Charles Guillemet reported in a statement on Twitter.

Guillemet reasoned Ledger’s issues by the outcomes of the ongoing crisis of a major global cryptocurrency exchange, FTX. The chief technology officer said that crypto investors have been increasingly offloading their holdings from crypto exchanges to Ledger, stating:

“After the FTX earthquake, there’s a massive outflow from exchanges to Ledger security and self sovereignty solutions.”

According to Guillemet, Ledger should have resolved the outages as of 5:30 am UTC.

Ledger first reported the wallet issues on Nov. 9 at around 11:00 pm UTC, officially announcing that its hardware wallet interface application Ledger Live was experiencing downgraded server performance.

“Specific issues may vary, including connecting to the My Ledger tab and performing a Genuine Check,” Ledger said in a tweet, adding that the client’s assets were safe.

The hard wallet company subsequently took to Twitter to announce that it fixed the server outage about one hour after detecting the issue. “Our server outage has been resolved and all systems are operational,” Ledger said, adding that their server outage was resolved and all systems were operational.

Previously, Ledger Support also announced that it also temporarily paused FTX and FTX.US swaps on Ledger Live. Ledger launched the swap integration with FTX in July 2022.

According to Ledger’s Twitter thread, the outages caused some users to be unable to send any transactions using Ledger Live, including withdrawals.

The crypto community was quick to react to the issues despite many staying confident about Ledger’s operations amid the larger market issues. Some industry observers criticized Ledger for choosing the wrong wording to communicate with their customers amid the ongoing issues at FTX. People apparently got triggered by Ledger’s wording “assets are safe” as FTX founder Sam Bankman-Fried made a similar statement on Twitter on Nov. 7, only to delete it a day after.

“FTX is fine. Assets are fine,” Bankman-Fried declared in his tweet, just hours before the exchange stopped all crypto withdrawals after becoming unable to process such transactions.

The recent issues on Ledger Live came as Ledger saw one of its “highest traffic days ever,” Ledger’s chief technology officer told Cointelegraph. “Traffic has increased significantly over time, even without major industry events,” he noted, adding that Ledger also previously saw plenty of traffic spikes after Celsius bankruptcy, the Solana hack as well as the FTX bank run.

Guillemet also said that Ledger Live had an “unusual load on the device manager service,” which is likely to be attributed to users updating their device for the first time in a while or using a brand new device for the first time. “It was quickly resolved and the team is already working on improving automatic detection and restoration,” he added.

A major rival cold wallet provider, Trezor, has not recorded any issues due to the FTX issues so far, Trezor executive Josef Tětek told Cointelegraph. “The only way to avoid these massive blow-ups is to understand self-custody as a necessity,” the exec stated. “Not an option; a true necessity,” he emphasized.

Despite self-custody being associated with its own set of risks, many crypto people, including Tether and Bitfinex chief technology officer Paolo Ardoino, still recommend users “always to self custody in cold storage” if they want to hold their Bitcoin (BTC) and crypto.

Hardware wallets to take similar approach to potential Ethereum hard fork

Forked coins have proven to be lucrative in the past. Holders of Ethereum came to possess an equivalent amount of Ethereum Classic when it forked in 2016.

Ethereum’s blockchain Merge is expected to take place around 5:05 am UTC on Sept. 15. It is a milestone that marks a full transition toward proof-of-stake for Ethereum and eliminates the need for energy-intensive mining by a projected 99.9% when compared to Proof of Work (PoW).

Some miners are also getting ready for a hard fork that would allow them to continue using PoW consensus. Forked coins have proven to be lucrative in the past. The holders of Ether (ETH), for example, came to possess an equivalent amount of Ethereum Classic (ETC) when it forked in 2016.

In the event of a new hard fork, in which the Ethereum blockchain would split into two different networks, users holding ETH on-chain would have an equal balance of ETHPoW (ETHW) on the forked chain. This would be an additional token and a totally different asset from ETH.

For ETH holders using hard wallets, the question is more straightforward: What would happen to your tokens if a fork followed the Merge? We have prepared some answers to this question so you don’t get lost or trapped in a scam in the coming hours.

Most of the hard wallet providers are taking the same approach: Monitor adoption on the new chain as well as the forked chain before adding any support for ETHPoW. They also say that there is no need for users to take any action during the upgrade.

Charles Guillemet, chief technology officer of secure hard wallet provider Ledger, explained to Cointelegraph: “In the event of a fork, the first thing everyone should know is that any assets the user currently has on the main network are safe,” adding that the company “will not support an ETH Proof of Work fork on day 1, as there are a number of technical aspects that need to be evaluated to ensure it’s safe for users, chief among those is ensuring the new chain is secure.”

Similarly, Josef Tětek, Bitcoin analyst at Trezor, said: “Trezor Suite will not support interaction with the pre-merge proof-of-work coins after the Merge, but users can still use their Trezor with a third-party interface like MetaMask to access the older version of the blockchain.”

Tangem, a Swiss wallet provider, also has no plans to support the PoW fork. “Until we are certain of the seriousness of the proponents of this hard fork, we are not ready to show our customers support for the project,” stated chief technology officer Andrey Lazutkin.

ETH holders who use non-custodial wallets and control their own private keys will have fast access to both sets of coins (ETHW and ETH). Private key owners can collect the forked coins using MetaMask to connect the PoW network to an Ethereum Virtual Machine wallet.

Crypto wallet companies also warn users to take extra precautions during and after the network upgrade. “Scammers are especially active during major network upgrades. Do not engage with anyone who claims you need to take urgent steps to protect your coins,” warned Tětek.

Ledger reportedly seeking additional $100 million in funding

Investors are said to be flocking to cold storage for their cryptocurrency as liquidity concerns plague the industry recently.

Having raised a mammoth $380 million funding at a $1.5 billion valuation in June, French cryptocurrency hardware wallet maker Ledger is looking to raise an extra $100 million, according to a Monday report from Bloomberg.

In June, Ledger raised $380 million in a funding round led by 10T Holdings. Now, according to reports, the company is seeking an additional $100 million to help it continue its rapid expansion. Business is said to be thriving as investors seek cold storage for their cryptocurrency, according to sources quoted by Bloomberg.

Hardware storage wallets from Ledger are a type of offline storage that isn’t connected to the internet, making them more secure against hacking than online wallets. This allows users to manage their own cryptocurrency without worrying about their provider’s liquidity.

The company’s products have been popular in recent years as investors seek to protect their digital assets from the hacks and liquidity problems that have plagued the cryptocurrency industry recently. Ledger’s business is reportedly expanding at a time when lenders and exchanges are experiencing liquidity concerns, according to Bloomberg’s source.

Cryptocurrency businesses in distress frequently stop client withdrawals to avoid a bank run. Singapore’s Zipmex is the most recent example, but lenders including Vauld and Celsius have both utilized the technique recently, with the latter filing for bankruptcy shortly after. Such concerns have driven thedemand for hardware wallets as a way to store digital assets offline and away from the potential liquidity issues.

While Ledger is said to be seeking more funding, the company has not commented on the reports. The hardware wallet provider is one of the most well-funded companies in the cryptocurrency industry, and its products are some of the most popular on the market. The wallet provider has also extended into crypto debit cards. The Crypto Life (CL) card was launched on the Visa network last December and instantly crypto into fiat from a safe wallet when used to pay merchants.

Alkemi Earn integration brings DeFi lending to 1.5M Ledger users

The objective of the Ledger project is to provide consumers with a way to purchase and use digital assets without giving up control to third-party platforms or systems.

The Alkemi Earn app has been added to the hardware wallet Ledger’s Discover area, making decentralized finance (DeFi) lending and borrowing service accessible to Ledger’s 1.5 million active customers.

According to a Tuesday announcement, users of Ledger Live can now earn yield on their assets with the Alkemi Earn integration. The goal of the Ledger project is to provide consumers with a method of buying and utilizing digital assets without giving them up to third-party platforms or systems.

“With Alkemi, Ledger users will have more ways to grow their assets while enjoying all the benefits of crypto without centralized custodians,” said JF Rochet, the vice president of international development for Ledger.

In February 2021, Ledger launched DeFi efforts with the open-source protocol WalletConnect, allowing users to access decentralized applications (DApps), such as Uniswap, 1inch and Curve.

Alkemi Earn is a lending protocol that enables institutions and retail borrowers to co-exist side by side. Alkemi allows institutions to put money into DeFi in a safe counterparty setting by providing both a Bank-Grade Verified pool and a permissionless Open pool. Since launching, the platform has amassed over $50 million in gross deposits. The integration with Ledger Live will likely attract even more users to the protocol.

Alkemi Network’s co-founder, Brandon Mahoney, emphasized that this process is more secure than other competitors’ products and solutions for noncustodial yield farming, stating that:

“’Not your keys, not your coins,’ as the saying goes. With this native integration into Ledger Live, Alkemi Earn unlocks a protocol-powered cash management experience for Ledger’s community. This is what bridging CeFi to DeFi is all about.”

Alkemi Earn’s ecosystem of products and services includes Ether (ETH), Dai (DAI), USD Coin (USDC) and wBTC as supported on-chain assets. Users can also earn ALK tokens by loaning and borrowing.

Staking is the process of delegating crypto to a staking validator to help secure a blockchain. It derives its name from the word “stake,” which refers to earning crypto profits and an associated passive revenue through a proof-of-stake consensus mechanism, as opposed to the Bitcoin (BTC) network’s mining-based proof-of-work.

What happens if you lose or break your hardware crypto wallet?

The safety of the recovery phrase is way more important than keeping the hardware wallet safe, according to executives at Ledger and Trezor.

Hardware cryptocurrency wallets are known for granting users full control of their crypto and providing more security, but such wallets are prone to risks such as theft, destruction or loss.

Does that mean that all your Bitcoin (BTC) is lost forever if your hardware wallet is lost, burned or stolen? Not at all.

There are a number of options to restore cryptocurrency for someone who has lost access to their hardware wallet. The only requirement to recover crypto assets, in that case, would be maintaining access to the private keys.

A private key is a cryptographic string of letters and numbers that allows users to access crypto assets as well as to complete transactions and receive crypto.

Most crypto wallets usually provide a private key in the mnemonic form of a recovery phrase, which contains a human-readable backup allowing users to recover private keys. The mnemonic form is typically enabled through BIP39, the most common standard used for generating seed phrases for crypto wallets.

Also referred to as a seed phrase, a BIP39 recovery phrase is basically a password consisting of 12 or 24 random words that are used to recover a cryptocurrency wallet. Crypto wallet platforms typically generate a seed phrase at the very beginning of setting up a wallet, instructing users to write it down on paper.

Not your keys, not your coins

According to executives at major hardware crypto wallet firms Ledger and Trezor, the safety of the recovery phrase is way more important than keeping the hardware wallet safe.

Keeping a private key safe is a guiding principle for the crypto community, embodied in the phrase: “Not your keys, not your coins.” The principle means that users are not really in control of their coins if they don’t own their private keys.

Both Ledger and Trezor wallets allow users to recover access to their wallets through a seed phrase by simply using another hardware wallet.

“A user could recover their wallet and funds on any of the other new Ledger wallets. Alternatively, they could also recover on a Trezor, SafePal or another hardware wallet device,” Ledger chief technology officer Charles Guillemet told Cointelegraph.

Users can also turn to software wallets to access their funds in case the hardware wallet was lost, stolen or destroyed. “If you lost your Trezor, but you still have your recovery seed, you can recover your funds through many hardware wallets and software wallets in the market,” Trezor chief information security officer Jan Andraščík said.

According to the Ledger and Trezor executives, the list of compatible software wallets includes platforms such as Electrum, Exodus, MetaMask, Samourai, Wasabi, Spot and others.

Threats to a backup phrase

As the safety of the recovery phrase is the top priority in maintaining access to a crypto wallet, one may be wondering how to best protect the seed phrase.

“Preserving the seed is one of the most crucial topics in Bitcoin security,” Andraščík told Cointelegraph. He pointed out three main threats when it comes to BIP39 passwords: those caused by the user themselves, any type of natural or human-made disasters, or theft.

Loss of a recovery phase is very common: A wallet user could accidentally throw it out or just not understand the importance of it at the very beginning of setting up the wallet.

Users could also choose the wrong place to keep their recovery phrase, with one common mistake of simply putting the phrase online. Crypto wallet users should never digitize their seed phrases in order to avoid unfortunate events such as hacking, Ledger’s Guillemet said, adding:

“It is paramount for users to secure the recovery phrase. It should be stored in a safe place and should not be digitized — in other words, don’t put your words in an email or a text file and don’t take photos.”

As such, most crypto wallets recommend their users simply write the seed phrase down on a piece of paper and store it in a safe place.

Tips to protect the recovery phrase

In order to ensure reliable protection for the recovery phrase, one may go further than just writing it down on paper.

Ledger and Trezor executives provide a number of recommendations for crypto wallet users to boost the protection of their seed phrases, including using fire-proof storing capsules or steel plates to engrave the recovery phrase.

Other sophisticated methods to protect a seed phrase also include distributing backups between several groups of people and locations such as family, a safe box at the bank, or a secret spot in the garden. One such method is known as Shamir Backup, allowing users to distribute their private keys into several parts that, together, are needed to recover the wallet.

While hardware wallet providers do their best to help users recover their assets in case they lose their wallets, there’s still nothing much they can do about losing a recovery phrase.

That is because the private key is designed to be held solely by the user of a noncustodial wallet, Trezor’s Andraščík said. He noted that the principle of noncustody and its security implications are completely against the idea of having some kind of “backup,” adding:

“If anyone has an opportunity to recover your Bitcoin, it means they have access to your Bitcoin, and you need to trust that these actors will always treat you with goodwill. We are getting rid of the need to trust, and rather, we encourage them to verify.”

“Ledger is also working to improve the user experience generally, removing the pain points without compromising security. That said, self-custody remains the DNA of blockchain and the DNA of Ledger. Users always remain in control,” Guillemet stated.