Ledger Unveils Controversial Seed Phrase Recovery Program
When it comes to how to store your crypto, there are three main options:
An exchange, like Coinbase, Binance, Kraken, etc.
A “hot” (connected to the internet) wallet like Metamask.
A “cold” (disconnected from the internet) wallet, like Ledger.
Each of these options provides a balance between ease of use and safety with exchanges being the easiest to use, but also the least “safe”.
Cold wallets, on the other hand are widely regarded as the most cumbersome, but safest option as they:
Are not at risk of getting hacked, due to them being disconnected from the internet.
Are not at risk of vanishing due to a collapse, a la FTX.
In other words, with a cold wallet, there is no way outside of losing your seed phrase (the set of random words that act as your wallet password) for you to lose your beloved digital coins.
But that may no longer be the case for the dominant cold wallet company.
Ledger, the Unicorn cold wallet developer that raised $100M back in March and has sold ~6 million wallets over the years, has come out with an update that has many security experts up in arms.
Ledger Recover That update is Ledger Recover, which seeks to address one of the largest hurdles toward the mass adoption of cold wallets: the difficulty of storing your seed phrase.
It’s hard to sell people on keeping the keys to their wealth on an easily forgettable/losable set of words; therefore, Ledger is rolling out the Recover program, an optional $9.99 per month seed phrase recovery service.
What Recover does is:
Verify your identity using your ID document and a selfie recording.
Duplicate and encrypt your seed phrase, in effect creating a secure backup for your seed phrase.
Link that backup to your verified identity.
Split that backup into three pieces, with the pieces secured by Ledger, Coincover, and a third provider.
This way, if you lose your seed phrase, all you need to do to recover it is verify your ID.
It sounds like the perfect solution to one of crypto’s key UX hurdles, but not everybody is happy. Notably, there is concern that:
Splitting the backup among three parts could leave it vulnerable, defeating the entire purpose of having a cold wallet.
Using your personal ID as a backup is a privacy breach and exposes users to identity theft, especially if Ledger has another data breach.
Ledger, however (and predictably), doesn’t see any issues with the Recover program. They assert that the program is optional, completely safe, and ultimately needed to onboard the next wave of crypto users.
For the sake of the industry, we sure hope they are right.
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SEC Alleges Collusion Between Jump Crypto And Do Kwon’s TerraUSD
A little over a year ago, the UST stablecoin was one of the largest in all of crypto, with an $18 billion market cap, while its companion coin LUNA was hovering right around $90.
At the time, UST’s method of maintaining its $1 peg was seen as revolutionary. Founder Do Kwon was the man who finally invented a truly decentralized and scalable stablecoin. Almost everybody agreed: LUNA was going to the moon.
Then all hell broke loose. UST lost its $1 peg, sending the stablecoin and LUNA into an inescapable death spiral. Both coins went to 0, billions of dollars in wealth were eviscerated virtually overnight, Do Kwon went on the run, and the bear market we are still stranded in today officially began.
But what if this all played out a year earlier, when LUNA was $17 (instead of $90) and UST’s market cap was $2 billion (as opposed to $18 billion)? Sure, it would’ve hurt, but not nearly as much.
Well, it almost did.
In May 2021, UST lost its peg all the way down to $0.90 before rebounding. Do Kwon was vindicated, and with newfound investor confidence, the LUNA bull run was off to the races.
But, it turns out that close call was not stopped by UST’s mechanics. Instead, it was stopped because of a dirty deal between Do Kwon and the crypto trading firm Jump Trading.
According to a recent court filing, the SEC has alleged that Jump Trading artificially maintained UST’s $1 peg in exchange for the ability to purchase LUNA for practically pennies. The SEC pointed out instances where Jump Trading was able to purchase the LUNA token for $0.3, $0.4, and $0.5 while it traded for $90 on the open market. That was a pretty damn good deal for Jump Trading, and it led to a $1.28B profit for the trading firm.
Revelations Now, as they love to do, the SEC is still suing (as they should) Jump and Do Kwon over this whole debacle.
Kwon already has more legal troubles than anybody not named Sam Bankman-Fried, but his lawyers want the case thrown out, claiming that the firm was responsible for only 6% of the purchases that helped restore UST’s peg.
We may never know the truth, but if it does turn out that Jump artificially maintained an obvious Ponzi scheme in return for under-the-table profits, it’d be pouring gas on the SEC’s “crypto is a lawless land and we need to regulate it” fire.
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When you think of the Secret Service, you probably think about men and women in suits and shades guarding the President from would-be assassins.
But, what most people may not realize is that the Secret Service was actually established to suppress counterfeit currency. In the year 1865, an alarming one third of all circulating currency was counterfeit. Responding to this crisis, President Abraham Lincoln enacted legislation to create a new branch under the Treasury Department, now known as the Secret Service.
It wasn’t until President William McKinkley’s assassination at the turn of the century (1901) that the Secret Service actually started protecting the President.
So although most people today equate the Secret Service with Clint Eastwood in The Line of Fire, the Secret Service is also responsible for protecting the integrity of the nation’s financial infrastructure by investigating bank fraud, credit card fraud, cybercrime, and now… cryptocurrencies.
And thanks to a Reddit Ask Me Anything (AMA) of all things, we now have a better picture of the Secret Service’s cryptocurrency dealings:
The Secret Service has a dedicated crypto unit, and this unit has a special requirement for admission: any new agent has to read the Bitcoin white paper. Honestly, that should be a requirement for everybody in crypto.
Over the last 9 months, the Secret Service has recovered and restored crypto to 17 victims.
If you think laundering money through crypto is “safer” than traditional finance, think again. As expected, the transparent nature of the blockchain makes it very easy for the authorities, like the Secret Service, to track the flow of money. As the Secret Service put it: if you want to hide your finances from the cops, “use cash”.
The Secret Service once found and reimbursed a victim of a crypto crime on Reddit. Who said that Reddit is a waste of time?
The Secret Service has an NFT collection, because of course they do.
Overall, it’s fun and refreshing to see a government agency that isn’t trying to rip crypto’s eyes out.
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