On Thursday, the Trezor hardware wallet shocked its users by proposing to implement customer identification (KYC) measures on their BTC (BTC) addresses. In this way, all addresses generated by the wallet could be associated with its owner.
The implementation plan was described by the company in its account on twitter. However, the negative repercussion of the ad made several users revolt, which led Trezor to cancel the update.
Trezor used a tool called the Address Proof of Ownership Protocol (AOPP). This protocol was released along with the latest Trezor Wallet software update released on Thursday.
In practice, AOPP is a way of signing a message proving ownership of a pickup address. That is, the user who wanted to withdraw their BTC would have to prove that they owned that address.
But along the lines of KYC, this proof can be anything from an email address to personal documents. Thus, the update would allow the addresses generated by the wallets to be associated with any data of their owners.
As justification for the move, Trezor said the implementation was intended to give the user greater control over their BTC. In addition, the process would serve to lessen the government’s power over people’s data.
“Not supporting the AOPP will lead to helping the government around people on exchanges, and our motivation to add direct support was exactly to keep the government from doing so.”
Trezor came to to say that users already shared this data with exchanges, which in turn were required to pass it on to the government, meaning that AOPP could have access to similar data from wallet owners.
Negative repercussion makes Trezor retreat
According to Trezor, AOPP would allow users to have greater control over their cryptocurrencies, particularly BTC (BTC). But the mechanism would also destroy the last bastion of privacy people still have.
Because of its pseudonymous character, BTC transactions are easily tracked. Services such as Chainalysis and the exchanges’ own KYC are already able to partially identify transactions. Therefore, hardware wallets are one of the few means that allow a little bit of privacy.
This is because most of these devices allow the generation of different addresses for each transaction, making it difficult to trace the operations. With a KYC, however, each address would be connected to the user’s identity, reducing privacy.
In this sense, hardware wallets would lose one of their biggest advantages over exchanges, as one Trezor user mentioned. In his criticism stated:
There’s no point in getting bitcoins off the exchanges if you cannot have sovereignty and privacy with your coins. I have bought quite a few of your products to give away to new Bitcoiners. Never again unless you reverse this.
And this Friday (28), Trezor felt the negative impact and finally went back, removing the AOPP. At the announcement the company said it will provide a guide for users to manually verify addresses.
Trezor said the implementation was intended as a means of improving the usability of accessing BTC addresses. However, it acknowledged that it underestimated the negative reception the update would get and therefore backtracked. No AOPP-like implementation is planned.
It should be noted that in recent years, several scams have been applied using fake Trezor software to steal cryptocurrencies. Other wallets, such as rival Ledger, have also suffered from customer data theft.