Coinkite reports $38M in Bitcoin drained due to Coldcard key generation flaw
Coinkite, the Canadian company behind the Coldcard hardware wallet, disclosed on July 31 that a critical flaw in its firmware’s seed generation allowed an attacker to drain approximately 594 BTC, worth. . .
Coinkite, the Canadian company behind the Coldcard hardware wallet, disclosed on July 31 that a critical flaw in its firmware’s seed generation allowed an attacker to drain approximately 594 BTC, worth roughly $38 million, from nearly 500 wallets. The entire attack took less than 30 minutes. The vulnerability traces back to a software change made in March 2021 with firmware version 4. 0. 0. During an integration of Bitcoin Core’s libsecp256k1 library, a build configuration error inadvertently replaced the device’s secure hardware random number generator with a predictable software-based fallback. That fallback used non-secret chip data, which dramatically weakened the randomness of the seeds generated on affected devices. How the flaw actually workedIn this case, Coldcard’s Mk3 devices were left with roughly 40 bits of effective entropy. Instead of the astronomically large number of possible seed combinations that should protect a wallet, the actual keyspace shrunk to something an attacker with sufficient computing power could brute-force. Later models, including the Mk4 and Q, fared somewhat better at around 72 bits, but that’s still well below the 128 or 256 bits that the crypto security community considers the bare minimum. Coinkite’s own statement suggested that the vulnerability was likely discovered using AI-assisted analysis of its open-source firmware. Coinkite had conducted its own AI-assisted code reviews, which failed to catch the bug. AdvertisementWhat Coinkite is doing about itCoinkite released emergency firmware updates on July 31: version 5. 6. 0 and above for Mk4 and Mk5 devices, and version 1. 5. 0Q and above for the Q model. Any seed generated on the compromised firmware versions remains vulnerable. Users need to create entirely new seeds on the patched firmware and migrate their funds. The company is advising affected users to generate fresh seeds, transfer all Bitcoin to the new wallets, and verify with test transactions before moving larger amounts. Coinkite also emphasized that strong passphrases could have provided an additional layer of protection, and recommended users consider alternative seed generation methods like dice rolls for maximum entropy. Coinkite confirmed that its other products, including Tapsigner, Opendime, and Satscard, were not affected. Those devices run on entirely different codebases and weren’t touched by the libsecp256k1 integration that introduced the bug. No other cryptocurrencies or protocols were impacted by the breach. This was a Bitcoin-specific issue rooted in wallet-level key generation, not a protocol vulnerability. What this means for hardware wallet users and the broader marketThe market reaction so far has been relatively muted, which suggests investors view this as an isolated incident rather than a systemic threat. This incident is likely to accelerate interest in multi-signature wallet setups, where funds require approval from multiple independent devices. A multi-sig configuration would have rendered this particular attack useless, since compromising one device’s seed wouldn’t be enough to move funds. Traders and long-term holders should treat this as a prompt to review their own security setups. If you’re running a Coldcard on any firmware version between 4. 0. 0 and the patched releases, migrating to a new seed isn’t optional. Disclosure:This article was edited by Editorial Team. For more information on how we create and review content, see ourEditorial Policy.