There has been a lot of controversy recently over Ledger's new recovery service which will shard your seed out to third parties for storage. What is the controversy?
This question was posed by Christopher Allen on Twitter.
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Ledger Wallet users are concerned if their keys are actually cold and secure after the latest "feature" release and several tweets that have later been deleted by Ledger.
The answer to whether Ledger funds are cold and secure is muddy. Are user funds secure (probably), is it cold absolutely not; however the revelation many are just now noticing is it NEVER has been cold.
Consider the following facts:
Ledger has always had the ability to extract keys because they push close-source firmware to wallets. It's that simple, but they more than likely have never done so and were just trying to make a point with their tweet. Nonetheless they do technically have the ability when the firmware is proprietary and closed.
Ultimately it is up to the user to choose their storage solution but it is important to know what trade-offs they are making and what abilities their wallet manufacturer has over their funds and device.
Christopher Allen answered the question on Twitter.
In large part because we didn't expect seeds to ever leave the Ledger device. As it turns out (as all hardware wallet designers already know), all it requires is a signed firmware update, and seeds can go wherever they want. Why? Ledger's hardware is based on a Secure Enclave (aka "SE"). That's is what generates and stores your private keys. The problem is that no existing SE chips can do secp256k1 (the curve used by Bitcoin & Ethereum) natively and safely in semiconductor logic. This isn't an issue with Ledger; it's an issue with all current chips used by wallets today. This means that in order to do secp256k1, a SE has to hand a key off to a code execution process in the SE or to an MPU. That's what opens the doors for doing unexpected things with that key — things that most didn't expect from a personal hardware wallet. In other words, the public might have had the expectation that keys weren't going to ever leave the Ledger, but that expectation is actually impossible to support today, because keys already have to leave the most trusted part of the Secure Enclave to be used! There are some advantages of this architecture — flexibility & future proofing. Doing cryptography using updatable code means as standards change, new curves are needed, the hardware wallet can adapt.
This is why Blockchain Commons hosts Silicon Salon. We have been working with chip manufacturers such as Cramium Labs, Tropic Square and RED Semiconductor. They recognize the need for new chips that support cryptography natively in silicon logic.
Based on presentations over the last year, we'll actually be able to fulfil the promise that seeds can't leave a device, something that's impossible today! And we can still offer future-proofing to enable new approaches like multisig and ZK proofs.
If you are interested in this topic, join the Silicon Salon community so that you can attend our next salon and talk about the future of cryptographic semiconductors. This is essential work to bridge between the cryptographic engineers, wallet developers, and semiconductor designers.