A recent wave of attacks on Bitcoin addresses associated with Coldcard wallets has potentially resulted in losses nearing $114 million, as researchers report that approximately 1,816 bitcoin have been moved from over 5,200 addresses since July 30.
Pending Transactions Indicate Replace-By-Fee Usage
The latest transactions are utilizing Bitcoin's replace-by-fee feature, allowing victims who identify their coins in the mempool to outbid attackers and secure their funds first.
Alex Thorn, the head of firmwide research at Galaxy Research, noted the current attack wave and explained that the attackers are leveraging the replace-by-fee mechanism. This feature enables a pending transaction to be superseded by another one that pays a higher fee, giving victims a brief window to act if they notice their address in the mempool, which is the queue of unconfirmed transactions.
The initial sweep began on July 30, resulting in the theft of 1,083 bitcoin from 1,196 addresses within just 41 minutes. Subsequent attacks over the weekend saw losses climb to a total of 1,367 bitcoin across 4,585 addresses.
The vulnerability exploited in these attacks originates from a firmware issue dating back to March 2021. This flaw allowed seed generation to be directed to a predictable software randomizer instead of utilizing the hardware randomizer, making the resulting keys replicable by anyone who understands the range. Coinkite, the manufacturer of Coldcard wallets, has since released emergency firmware updates for all affected models and advised users to transfer their funds to wallets created with new seeds.
Thorn, despite lacking direct reports from victims, shared his insights based on observed patterns, prioritizing timely alerts while the transactions remained unconfirmed.
If the trend continues, the cumulative losses from the four attack waves could reach approximately 1,816 bitcoin, equivalent to nearly $114 million, from more than 5,200 addresses since the onset of the attacks.
Thorn recommended that users verify their funds, transfer anything off affected devices, and increase transaction fees to secure their assets.
The attack pattern affected blocks 960,778 to 960,792, with 218 transactions impacting 462 victim addresses, occurring at a frequency of about 14 sweeps per block, significantly higher than the typical rate of 0.3 during a control period prior to the incidents.
Each compromised coin was sent to new addresses without prior histories, indicating a shift from the previous waves, which targeted shared collector addresses, making tracing more challenging.
Notably, the initial three attack waves did not compromise multisignature setups, aligning with the identified flaw affecting single-key seeds. Additionally, six destination addresses with extensive prior activity emerged, as freshly generated attacker addresses would not possess transaction histories.