Why Ledgers PR Meltdown is a Valuable Lesson in Crypto Security

Why Ledgers PR Meltdown is a Valuable Lesson in Crypto Security

Ledger’s recent PR meltdown highlights the limitations of hardware wallets and serves as a reminder of the importance of managing expectations in the blockchain industry.

After a video went viral of what seems to be a hardware wallet getting smashed with a hammer and then blow-torched into a charred mass, Ledger (and all of the cryptocurrency industry) got a searing reminder on the importance of managing expectations.

Blockchain Tech industry executives often say they idealize “decentralization,” “self-sovereignty” and “trustlessness” – espousing a vision for a future internet and financial ecological system free of rent-seeking intermediaries and unreliable middlemen.

On the other hand, time and time once more, major blockchain tech corporations and projects come up short – with users surprised and angry to realize that they unknowingly placed their trust in shoddy code, centralized entities or security-challenged hardware.

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The most recent example comes from Ledger, the Paris-based cryptocurrency hardware wallet company, which, following a public-relations firestorm past week, announced Tuesday that it would delay intends to release a controversial new wallet- recovery feature was known Ledger Recover.

And once it revealed the proposed feature past week, Ledger inadvertently drew attention to the fact that the company could theoretically move wallet seed phrases off-device via user-approved firmware upgrades. Previously, the company left some users with the impression that its devices were engineered to avoid this specific scenario.

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Once the  capacity “backdoor” was revealed, outrage flooded Cryptocurrency Twitter, with posters panning Ledger for being out of touch with its own customer base – ostensibly self-sovereign types who want nothing but to be entirely in control of their own cryptocurrency. Ledger vehemently rejected states that its capabilities amounted to a “backdoor.” On the other hand, the company’s initial response to the outrage – pointing out (in a now-deleted tweet) that users were always trusting Ledger not to extract user keys – only served to fuel the furor: 1 widely-circulated video appeared to show a user smashing a Ledger device with a hammer and then blow-torching it into flames.

In a letter posted to Twitter on Tuesday, Ledger CEO Pascal Gauthier apologized to customers, promised to open-source “as much of the Ledger operating system as possible,” and stated he’d delay the release of Ledger Recover.

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Delay or no, Ledger’s theoretical capacity to move user keys via future software upgrades remains intact – mainly as a by-product of technical constraints with how Ledger and similar wallets are engineered.

The fiasco served as a valuable collapse course on the limitations of hardware wallets, traditionally considered the most secure way to hold cryptocurrency. It was likewise a reminder that the present state of cryptocurrency technology doesn’t always match up with the industry’s ideals – and a lesson on the importance of carefully managing expectations.

Ledger’s PR Meltdown

Ledger’s primary error in the leadup to past week may have been in its marketing, which frequently leaned into cryptocurrencies  “trustless” ethos. The messaging was attractive to hard-core cryptocurrency users, but it left an impression of Ledger’s technical capabilities which was out of pace with reality.

Ledger’s co- founder and previous CEO, Éric Larchevêque, argued on Reddit that last week’s “meltdown” represented a “total PR failure, but definitely not a technical one.”

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Larchevêque, who is a Ledger shareholder but no longer works at the company, wrote that as the company’s user base grew, so did a misperception – fueled largely by Ledger itself – that Ledger’s wallets require zero trust on the part of their users.

“People started to think Ledger was a trustless solution, which is not the case,” he wrote. “ Several amount of trust must be placed into Ledger to use their product.”

Developers can potentially have understood the nuance, but users didn’t. Larchevêque linked to an justification of what happened from Reddit user cmplieger: “Fundamentally nothing has changed with the lLedger hardware or software,” cmplieger wrote. “What has changed is the fact that the lLedger developers have decided to add a feature and benefit from the flexibility their little computer grant, and people eventually  started to comprehend the product they purchased and trust factor involved.”

The most-upvoted comment on that post came from Reddit user Florian995: “What I learned is the fact that I know nothing about the wallet I am using.”

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Hardware limitations

It’s reasonable to be angry when corporations oversell their products, but goals like trustlessness and decentralization exist on a spectrum, and hard-core cryptocurrency acolytes who think they can abandon one company for a more ideologically pure alternative can potentially be disappointed.

The case of Ledger outlines how the overall state of blockchain tech simply isn’t up to the task of some of the industry’s boldest promises.

Ledger boasts that its USB thumb drives are among the most secure ways to hold cryptocurrency because they store user keys in a “secure element” – a mini computer chip that is supposed to be impenetrable. Ledger’s “trustlessness” states mainly center around the secure element, and the company explicitly reassured users that it’s unable to reach into the element to obtain user keys.

Reports by Christopher Allen, chief architect at Blockchain Tech Commons, a cryptocurrency infrastructure not-for-profit, chip technology is not is still at the point where Ledger could make such a guarantee.

“Ledger got caught in a weakness that all wallets to a certain extent have today as a result of chip technology,” Allen informed CoinDesk. Secure element chips can’t perform the kind of cryptography required to completely encrypt user keys on-device. (Allen reveals his team at Blockchain Tech Commons is working to change this, though the tech isn’t ready.)

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There is really nothing wrong, necessarily, with Ledger,” argued Allen. “They inadvertently exposed an architectural weakness that is all over the place.”

Bradley Keoun.


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