Over the past 12 months, some investors have learned the hard way why they need to move cryptocurrencies offline. Those who store their Bitcoin (BTC) and altcoins on cryptocurrency exchanges like FTX lose control of their assets, sometimes forever. The incident drew a red line under the famous crypto maxim: “Not your keys, not your coins”.
However, FTX’s loss is hardware wallet maker Ledger’s gain. The Bahamas-based exchange, which filed for bankruptcy in November 2022, gave Ledger “our biggest sales day ever,” and that “November was our biggest ever,” the company’s chief experience officer Ian Rogers told Cointelegraph. sales month”.
Paris-based Ledger has been on a strong growth curve of late, although the past year has not been without controversy. In May, for example, the company sparked industry outrage when it launched a new secret recovery phrase storage service called Ledger Recover. Despite this, it remains one of the most well-known and used crypto wallet manufacturers in the world.
Recent Cointelegraph I interviewed Rogers and Ledger CEO Pascal Gauthier in New York to discuss the new encryption environment in the United States, the latest trends in encrypted storage, and the differences in doing business in the United States and Europe.
Cointelegraph: Many believe that the crypto/blockchain industry is still in the doldrums, or moving sideways at best, but even in the United States, do you think there is reason to be happy?
Pascal Gauthier: What happens in 2023 (and goes almost unnoticed) is that attitudes towards Bitcoin change. When the SEC (Securities and Exchange Commission) suggested that Bitcoin is a utility and/or commodity rather than a security (like other altcoins), this triggered two things: Big companies like BlackRock started The ETF (exchange-traded fund) application process was introduced, and then the media narrative surrounding Bitcoin changed almost overnight.
As 2023 begins, Bitcoin is for drug dealers, terrorists, bad for the planet, etc. – and suddenly, it’s completely legal. The largest financial institution in the United States suddenly started doing Bitcoin.
CT: Is BlackRock’s application for a spot market Bitcoin ETF a turning point?
PG: A lot of money is coming into the cryptocurrency space; it has been announced. It might take a few years to actually get there, but if you look at Fidelity, BlackRock, Vanguard…
CT: What are the regulations like in the United States? Aren’t they still an obstacle?
PG: The next administration will decide the fate of cryptocurrencies in the United States. If Biden remains in power, the administration will likely continue to take a positive stance on cryptocurrencies. If it were anyone else, we’d see what happens.
CT: Let’s talk about offline storage devices. Mark Cuban said in 2022 that crypto wallets “suck.” Does he have a point?
PG: Many of our early customers used our (cold wallet) product to “buy and hold.” You can buy a ledger (device), put your Bitcoins in it, put it somewhere and forget about it. But that’s not what we recommend right now.
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Today, you can connect your wallet to Web3 and use your private keys to do many things, including buying, selling, exchanging, and staking cryptocurrencies, as well as participating in DApps (decentralized applications), and even filing taxes.
CT: On a scale of 1 to 10, where would you rank cold wallets right now in terms of user experience (UX)?
PG: For industry, it’s three. For Ledger, maybe a 4, we’re working towards a 10. The industry still has a lot of work to do in terms of UX and UI (user interface).
Ian Rogers: Today’s hardware-software combination is more than just hardware and software. It’s an end-to-end experience.
For example, when you buy an Apple iPhone, you’re not buying hardware; You’re buying into the Apple experience. We eventually hope Ledger can do the same. Our approach is to provide the absolute best user experience without compromising security or self-hosting.
CT: There are still these user experience issues, like if you lose your Ledger device, you need 24 seed words to recover your private key. Some users went to great lengths to protect the words, even carving them into steel to prevent their houses from burning down. Doesn’t this sound a bit extreme?
PG: It’s a bit backwards to have things like sheet metal in your home. This is not the 21st century yet. But we came up with a solution for this.
When you use a Ledger product, you eventually receive a Ledger device and PIN. Basically, you’ll also have these 24 words that will become your master password.You need to keep these 24 words safe, and this yes A major barrier to entry for many. They don’t believe they can say these 24 words. They don’t believe they won’t lose them.
Therefore, we came up with a service called Ledger Recover, an optional paid subscription service offered by Coincover that is expected to launch in October, to solve this problem.It allows you to split your private key into three encrypted shards and then send them to three different custodians. They cannot perform any operations on the (single) encrypted shard. Only you can recombine the 24 words if necessary.
CT: Don’t we already have something like “social rehabilitation”? entrust How many friends or “guardians” did you restore your cold wallet to?
PG: Social recovery doesn’t really work. We do something similar to social recovery – but for businesses (i.e. Ledger, Coincover and EscrowTech). If you want to initiate shard recovery, you must present your ID.
CT: When you first announced the Ledger Recover service in May, you received criticism. Then, launch delayed Amid “backlash”. There are security issues. People say these three shard holding companies can reconstruct your private keys.
PG: There’s still a lot of work to be done to get people to truly understand how security works. People said (at the time) that it could be a good product if it were more transparent and easier to adopt. Therefore, we did not go live in May as planned in order to make the product “open source”, which adds transparency, but not security,
CT: But, at least in theory, couldn’t the three sub-escrow companies cooperate and reconstruct your privacy keys?
PG: it’s out of the question. They don’t have the necessary tools to decrypt and reconstruct.
CT: Speaking of Ledger’s business model, are you sometimes concerned that as large institutions like Fidelity Investments or banks like BNY Mellon enter the cryptocurrency space, users might simply store their cryptocurrency with them? If they get hacked, those massive regulators will make them whole again. Or at least that’s what is sometimes thought.
PG: We are a pure technology company. So when Fidelity decides to become a (retail) cryptocurrency custodian, they may come to us and buy some of our technology to build their own technology stack.
CT: Your business spans several continents. Your headquarters are in France, but many of your devices are sold in the United States. You have first-hand experience in both business environments, the United States and Europe. Are there key differences when it comes to cryptocurrencies?
PG: Generally speaking, Europe has a tendency to overregulate or regulate too quickly. Sometimes people say, well, you know, Europe is very clear because it has MiCA (Market in Crypto-Assets, the EU’s new crypto legislation), whereas in the United States, there’s a lack of clarity and there’s a lot of litigation.
But in the United States, the process of enacting the law has been slow and bumpy. Changing laws in the United States takes time, but when change finally comes, things tend to be better.
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If you look at the biggest tech champions in the world, most of them are American or Chinese. Zero is European.
CT: Do you connect tight regulation with a lack of innovation?
PG: It’s hard to say whether there is a direct link, but Europe has been tough on taxes and regulations.
Ian Rogers: To me, there is no doubt that they are connected. At LVMH (the French luxury goods group where Rogers served as chief digital officer for five years), we work with many startups. Every European startup wants to “scale up” in the US or China before returning to Europe. If you are a new startup, Europe is not a good market.
CT: But Ledger remains optimistic about the prospects for cryptocurrency and blockchain technology in general?
PG: Things are not necessarily what they seem. This is our (late) French President François Mitterrand, explain: “Give time.” Something is happening now, and only the future will figure out what is happening.
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