A vulnerability in Coldcard wallets led to over $130 million in Bitcoin theft, as seed generation security was compromised.
Summary
- A firmware flaw in Coldcard wallets led to the use of a software pseudo-random generator for seed key generation, compromising security.
- The effective search space for older models dropped from 128 bits to around 40 bits.
- This vulnerability has resulted in theft exceeding $130 million in Bitcoin.
Recent findings have revealed significant security concerns with Coldcard wallets, which were previously considered secure Bitcoin storage solutions. The wallets, developed by Canadian firm Coinkite, were intended to operate offline, but a firmware issue allowed hackers to deduce private keys without resorting to phishing, malware, or physical theft.
Galaxy Research reports indicate that approximately 1,596 BTC has been stolen across three confirmed incidents, with estimates suggesting the total could rise to around 2,055 BTC, valued at roughly $130 million. In one notable incident, $70 million was transferred in just 41 minutes. Coinkite acknowledged that at least 15 different attackers have exploited this flaw.
On August 1, Coinkite provided a detailed technical explanation of the issue, revealing that for eight years, the wallet had been generating seed keys with faulty randomness, going unnoticed until now.
Understanding the Vulnerability
In a 2021 update, Coinkite switched Coldcard's cryptographic framework to libsecp256k1, which inadvertently redirected the seed generation process from the hardware random number generator to a software fallback called Yasmarang, intended for devices without a randomness chip. This coding error led to a significant reduction in security.
🚨LOSSES FROM COLDCARD HACK EXCEED $100M
High confidence 1,596 BTC has been stolen from ~7300 addresses across 3 confirmed waves + more 14 smaller incidents.
If we add suspected (but unconfirmed), the total balloons to $130m (2k BTC).
More in the thread below 👇 pic.twitter.com/RAl3ib67qa
— Galaxy Research (@glxyresearch) August 3, 2026
Despite being equipped with a randomness chip, it was rendered inactive due to the coding oversight. A build guard incorrectly checked for a setting rather than its activation, leading to a false sense of security. Coinkite noted that the majority of randomness was derived from a pseudo-random number generator, which, while statistically valid, lacked true unpredictability.
The vulnerability was particularly pronounced in Mk2 and Mk3 models running specific firmware versions, where the seed values were based on the device's serial number and clock, reducing the effective search space to about 40 bits—far below the expected 128 bits. Newer models fared slightly better, with a search space of around 72 bits, but still inadequate for secure cryptographic practices.
Block's engineering team assessed the situation and indicated that the search space for older models made wallet generation predictable, undermining security.
Implications of Predictability
Coinkite speculated that the vulnerability may have been discovered through automated tools, suggesting that attackers might have used AI to analyze previous firmware versions. Firmware updates have been issued for all affected models, but users must generate new seeds and transfer their assets to ensure security.
Addressing the Vulnerability
As users rushed to secure their wallets, many turned to low-tech solutions like rolling dice to create entropy for new seeds. Coinkite advises that seeds generated with at least 50 independent dice rolls are safe from the identified bug. However, caution is warranted as not all dice are created equal in terms of randomness.
For users who generated seeds on compromised Coldcard devices, it is crucial to update the firmware, create a new seed, and transfer all assets to a secure wallet. The incident highlights the need for ongoing scrutiny of hardware wallets and the importance of verifying claims of randomness in cryptographic processes.
Future Considerations
This situation emphasizes the necessity of not taking hardware wallet security for granted. While the Coldcard's source code was publicly available, the operational integrity of the hardware random number generator went unverified for years. Users are reminded that true randomness must be derived from physical phenomena, not just statistical outputs.
