Coldcard Crisis Exposes Weakness in Hardware Wallet Security

Coldcard, a leading hardware wallet manufacturer, has faced a major crisis after it was discovered that a firmware defect in some of its devices exposed users to a significant risk of theft. The bug, which affected certain models of Coldcard wallets running firmware versions 4.0.1 through 4.1.9, diverted the device's random-number generation from its STM32 hardware source to MicroPython's deterministic Yasmarang fallback.

This resulted in seeds with low cryptographic randomness, allowing attackers to reconstruct the keys used for Bitcoin transactions. The flaw affected an estimated 7,700 addresses, with losses totaling around $130 million, according to TRM Labs' estimates.

Coldcard's technical notes revealed that the correct hardware random-number generator existed in the firmware binary, but it was not being used correctly. This oversight allowed attackers to exploit the weakness and steal funds from affected users.