Coldcard hardware wallet firmware flaw emptied thousands of Bitcoin wallets

A faulty line of firmware released by Coldcard in March 2021 caused the loss of Bitcoin from thousands of wallets this summer. The vulnerability lay in a build-flag check within a cryptography library that tested whether a setting existed rather than whether it was enabled. The code compiled cleanly, but seed generation fell through to a software generator seeded from the chip's serial number and timer state, producing entropy of roughly 40 bits instead of the 128 bits a standard seed should carry.

At 40 bits of entropy, recovering the original seed became computationally feasible. Attackers reconstructed the flawed seed generator, enumerated the small set of seeds it could produce, derived the addresses each seed implied, and checked them against the public blockchain. Galaxy Research documented 1,367.05 BTC transferred from thousands of addresses, worth about $88.6 million at the time. The average dormant address had been inactive for 3.18 years.

Coinkite, the Coldcard manufacturer, published an advisory and shipped a fix within days. Co-founder Rodolfo Novak stated that the company takes responsibility but acknowledged that the update removes the faulty path without being able to repair seeds already generated from it. One user reported losing approximately 1.6 million Canadian dollars worth of Bitcoin that had been stored on a Coldcard device kept in a safety deposit box and never connected to the internet.