Digital Asset Custody Series: Decrypting Ledger Recover

Ledger launched a new service on May 15, 2023, called ‘Ledger Recover,.’ an opt-in ID-based key recovery service that backs the wallet’s secret recovery phrase. If a user loses or does not have access to their secret recovery phrase, the service allows them to securely restore their private keys using a Ledger device. The feature was announced without a detailed description and was greeted with severe criticism from the community. Ledger’s co-founder and former CEO, Éric Larchevêque, argued on Reddit that this is a PR failure but not a technical one.

In the Ledger Recover service, a pre-BIP39 version of the private key- the 256-bit number generated by the Secure Element chip, is encrypted, duplicated, and divided into three shards, each secured by a separate company- Coincover, EscrowTech, and Ledger. When users need access to their wallet, two out of three parties can return shards to the new Ledger device, reassembling them to reconstruct the private key.