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This new feature is designed to enable seed recovery even in case of loss.
The seed, also called a “recovery phrase,” is a list of words that allows to recover the wallet.
Since anyone who owns that list can retrieve the wallet freely, it is absolutely necessary to store it safely to ensure that it does not fall into the hands of anyone else.
It is generally preferred to keep it on paper in a safe, so that it can possibly be retrieved very easily at any time, but at the same time preventing it from falling into the hands of others.
Better yet, it is generally recommended to keep it divided into two or three parts, kept in different places, such as different safes.
However, it often happens that the person who wants to recover his wallet has lost the seed, either because he cannot remember where he is keeping it, or because the sheets of paper on which he wrote the list of words have been lost or destroyed, or have been rendered illegible by, for example, water.
In the event that the seed has been lost, the user who needs to retrieve a wallet has no chance of recovering it. Therefore, the optional additional functionality of seed recovery has been added to the Ledger Nano X.
The problem is that in order for the user’s seed to be retrieved even if it is lost, the new feature sends it to a third party, split into three encrypted fragments.
How it works was described yesterday by the company’s CTO, Charles Guillemet, in a video posted on Ledger‘s official Twitter profile.
Exciting update, Ledger has a new product, Ledger Recover, that’s launching soon: https://t.co/nT1VHnnSYz
🧵Here’s what Ledger Recover is and what it isn’t, explained by @P3b7_ & in the thread below. pic.twitter.com/RW1w07H6pK
— Ledger (@Ledger) May 16, 2023
Thus, those who would activate the new Ledger Recover feature on their Nano X, after performing the firmware update, would in fact start the process of segmenting, encrypting and sending their seed to third parties unknown to them.
The risk is that, in this way, the user’s seed could fall into the hands of others.
First of all, since it is an optional feature that is not automatically activated even by installing the Nano X firmware update, it is sufficient not to activate it to prevent seed sending.
This way you do not authorize the hardware wallet to send the seed to anyone.
The alternative might be to simply avoid installing the new firmware, but it is not recommended not to update the software that runs the device because an outdated firmware might contain vulnerabilities later fixed.
Furthermore, since it is a feature present only on the Ledger Nano X, those who want to avoid the problem altogether at this time could use other devices, such as the Nano S.
However, it is possible that a similar functionality will be introduced in future firmware updates of other devices as well, although there will most likely always exist hardware wallets on the market without any similar functionality.
Therefore, this problem seemingly would appear not to exist, because there is a way to avoid it altogether.