Summary
- Coinkite identified a build error causing seed generation in its Coldcard wallets to rely on a software fallback instead of the hardware generator.
- The company suspects an attacker leveraged AI to exploit this vulnerability, which was undetected in its own AI assessments weeks prior.
- All current models are impacted, and firmware updates do not rectify already compromised seeds.
Coinkite has reported that a security flaw in its Coldcard hardware wallets has resulted in significant losses for users, amounting to tens of millions of dollars in Bitcoin. The company believes that an attacker may have used AI to uncover this vulnerability, despite their own AI review finding no issues just weeks earlier.
On Thursday, Coinkite issued an advisory regarding its Mk3 model and a technical explanation after discovering that the seeds generated were more predictable than intended.
COLDCARD Mk3 Security Advisory
If you generated a seed on a Mk3 after firmware version 4.0.1, your funds may be at risk.
According to our preliminary analysis, the Mk4, Q, and Mk5 models are not affected.
Read the advisory and proceed with caution: https://t.co/3vgPHOjMS7
— COLDCARD (@COLDCARDwallet) July 30, 2026
The exploit, which occurred early Friday, has led to losses estimated at 594 BTC, approximately $38 million. The funds were withdrawn from around 500 wallets within a span of 25 minutes, with 562 BTC later consolidated into a single address.
Coinkite stated that it must consider the possibility that "someone used AI to examine prior firmware versions" to discover the flaw. The firm noted that they had previously run one of the best AI models on their code weeks before, which did not reveal this issue or any significant bugs. They emphasized that both attackers and defenders have access to similar tools, but in this instance, it only benefitted the attackers.
Analysis of the Problem
The Coldcard firmware includes a function for generating randomness, but two versions of this function were present in the code: one from Coinkite's hardware generator and another from a software fallback derived from MicroPython. A preprocessor check only verified the presence of a setting without assessing its value, leading to the fallback being used without any errors. This issue has been present since a migration in March 2021.
All current models are affected to varying extents. Coinkite estimates that the effective search space for an Mk3 seed is around 40 bits, whereas a seed should ideally have 128 bits. The Mk4, Q, and Mk5 models benefit from additional entropy from secure elements, raising their effective search space to about 72 bits, which the company states significantly improves security but still falls short of the target. Other products like Tapsigner, Opendime, and Satscard utilize different code and are not impacted.
Actions for Affected Users
Coinkite has released an emergency hotfix, version 5.6.0 for the Mk4 and Mk5, and 1.5.0Q for the Q model. However, simply updating the firmware will not secure seeds that have already been created with the vulnerable versions. Users will need to generate a new seed using patched hardware, and Coinkite recommends employing a strong BIP-39 passphrase, at least 99 dice rolls, or both. Owners of the Mk3 model, which is no longer supported, are directed towards a different migration option.
1/ Earlier today, our Bitcoin engineering and security teams at Block began investigating reports of non-Bitkey wallets being drained. To proactively protect our customers, we began investigating immediately. Here’s what we found 🧵
— Max Guise (@max_guise) July 31, 2026
A seed generated on a compromised Coldcard remains weak even if restored on a different brand's device, a fact highlighted by rival hardware wallet manufacturer Trezor, which reassured its users that their funds are secure. Block, which conducted an independent review on Friday, confirmed that none of its products are affected and its hardware lead Max Guise advised anyone impacted to transfer their funds as soon as it is safe to do so.