Dragonfly Estimates Coldcard Hack Prevention Cost at $2

Haseeb Qureshi, managing partner at Dragonfly, has stated that a mere investment of $2 in AI-driven code inspection could have thwarted the recent hack of Coldcard wallets. He emphasized that the current landscape of cybersecurity revolves around financial expenditure, especially as AI technologies become more adept at identifying vulnerabilities.

“People are not appreciating one of the biggest takeaways from the COLDCARD hack,” Qureshi remarked, highlighting the importance of investing in advanced AI tools for vulnerability scanning.

Qureshi's analysis indicates that the effectiveness of a product's security hinges on the financial resources allocated by developers for AI-assisted code scrutiny, juxtaposed against the investments made by cyber attackers. He pointed to a recent incident where the AI model Claude reportedly exploited Coldcard's vulnerability within eight minutes, although he expressed doubts regarding the reliability of this timeframe, suggesting it may have utilized publicly accessible information.

In a subsequent test, another user employed GLM 5.2 in an offline environment, which extended the detection time to 20 minutes. Qureshi calculated the cost of scanning based on the API pricing from Zhipu AI, estimating that the total expense would amount to approximately $2, reinforcing his conclusion that strengthening security with AI could have effectively identified the Coldcard vulnerability.

Significant Financial Fallout from the Hack

Galaxy Research has revealed that at least 15 different attackers capitalized on the Coldcard vulnerability, resulting in an estimated damage of $100 million. This figure has been derived from analyzing reports from victims, noting that the nature of the attack's spread was gradual, unlike centralized exchange breaches where impacts are immediately visible.

“We continue to receive victim reports and provide them with information to report to authorities,” stated Alex Thorn, head of research at Galaxy Research.

Thorn noted that a single victim's report of a theft involving less than 1 BTC helped uncover a new attack that withdrew 12 BTC from multiple addresses. Analysts believe that losses from three confirmed waves could reach $100 million, with projections suggesting the total might escalate to approximately $130 million if a suspected fourth wave occurs.

On July 31, around 500 Coldcard users lost a total of 594.48 BTC, prompting many to transfer their holdings to new addresses rather than exchanges, as reported by Glassnode. In response to the breach, Trezor and Foundation issued alerts regarding phishing attempts following the incident.