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Hardware wallets like Ledger or Trezor are widely considered the best way to safely secure your crypto. But what would happen to your crypto if either company shut down or went bankrupt?
To answer this question on crypto recovery, it’s important to first understand how the underlying blockchain technology works. One of the core tenants of this technology is the use of a distributed ledger. At a fundamental level, blockchains are simply a record of value transfer between parties. In the case of Bitcoin, anyone who wants to, can download and run a copy of the Bitcoin blockchain. These are known as nodes and help secure the blockchain by validating transactions. Each copy contains a full record of every transaction every wallet has made. Every copy of the blockchain, therefore, knows where every coin or token is located.
Wallets are how users interact with each other. They are composed of public and private keys. The blockchain records the information of value transferring from one public key address to another. Anyone can know your public key address but only the owner of the wallet should have access to their private keys. A simple way to think about crypto wallets is to compare them to a mailbox. Your postal address is like your public key. This is how other crypto users know where to send you crypto. Your private key is like your private key for your mailbox. Only you have access to it, and it should remain in a secure location.
Written by Iain Taylor Arrow Right Contributing writer
Iain Taylor grew up in Northern Ireland, and is currently living in Halifax, NS. He has quadruple citizenship status, and has been involved in cryptocurrency since the end of 2020 with in-depth knowledge of blockchain and Bitcoin.
|Jul 16, 2024
Can I Still Access My Crypto?
Yes. The most important point to remember is that your cryptocurrency lives on the blockchain, not in your wallet. Your crypto lives on the blockchain, your keys live in your wallet. Once this concept is grasped the idea of accessing your crypto if Ledger or Trezor are shut down becomes clearer.
How Would I Regain Access to My Crypto?
In the worst-case situation where Ledger or Trezor are shut down, the retrieval process is the same as if your device had been lost or stolen. This is because neither operates in a closed system where your private keys are locked into a single device. If you purchase a Ledger or Trezor cold storage wallet, the company does not collect or store your passwords on a central database. Rather, a random 24-word recovery phrase is generated during the set-up stage that they do not have access to. Both Ledger and Trezor operate on the BIP-39 standard. This is an industry-wide protocol that uses a common emergency backup phrase.
The BIP-39 standard is used by Ledger and Trezor as part of their design. It heightens the level of security by eliminating the opportunity for them to have access to users’ accounts and crypto. It puts full ownership and custody of a user’s wallet onto the user. Full sovereignty over one’s accounts. This means that the 24-word recovery phrase is the single most important piece of information for securing a users’ crypto. If this seed phrase is lost or forgotten, then there is no way to retrieve it and the crypto will be inaccessible.
Why the Confusion?
Blockchain technology is in its infancy. It has only been around since 2009 and because of this, a majority of people are still unfamiliar with it. The idea of self-sovereignty, and being personally accountable for the security of your finances is a foreign concept to most people.
Another major reason for the confusion over wallets and crypto recovery is poor reporting and FUD in the media. It’s an easy story to sell about how dangerous using cryptocurrency is compared to legacy financial institutes. This is done through sensationalized stories on users who lost millions of dollars of crypto in a landfill or boating accident. These stories usually either skip over some of the key details or are simply factually misleading. They gloss over the fact that the crypto is not stored on any hardware device. Yet stories are easier to digest and frame through this narrative.
Conclusion: Recovery Phrase is Ultimate Protection
Blockchain technology is complex but easy to understand after grasping a few key concepts. One of these concepts is how wallet addresses interact and store keys. When dealing with a cold storage wallet like Ledger or Trezor it is best to think of them as how banks relate to fiat currency. Users essentially become their own bank rather than having to rely on a third-party intermediary to approve transactions. Ledger and Trezor wallets offer a strong layer of security for storing and accessing your private keys. Due to the BIP-39 standard, users can rest assured that even if Ledger or Trezor were to shut down their crypto would remain secure and accessible. Accessing it is as simple as opening a new wallet that utilizes the BIP-39 protocol and using your 24-word recovery phrase to recover your account.
One final point that is important to comprehend is the ownership over one’s wallet addresses is directly linked to who controls the private keys. Certain exchanges make use of custodial wallets where a user gives up control of their private key information to use some of the features on that exchange. Using a cold storage wallet like Ledger or Trezor that is not connected to the internet where the user retains full control of the private keys is the most secure way to store cryptocurrency. The trade-off is that the user becomes fully liable for their crypto security.
Always remember, not your keys, not your crypto.
Article Tags
BeginnerSecurityWallets
About the Author
IainTaylor
Iain Taylor grew up in Northern Ireland, and is currently living in Halifax, NS. He has quadruple citizenship status, and has been involved in cryptocurrency since the end of 2020. He completed a study in Bitcoin, Blockchain Technology, and Cryptocurrencies at Dalhousie in 2021, and has been writing on the industry since September 2021.
Learn more aboutIain Taylor
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