Coldcard Firmware Flaw Drains $38 Million in 25 Minutes

An attack on Coldcard's firmware drained $38 million in BTC from approximately 500 wallets in just 25 minutes. The attacker exploited a seed generation flaw that reduced the effective entropy of Mk3 seeds from 128 bits to around 40, making private keys guessable through brute force computation.

The bug was present since March 2021 and affected all current Coldcard models to some degree, with Mk4, Q, and Mk5 seeds estimated at roughly 72 bits of entropy instead of 128. Updating the firmware does not repair existing seeds, so owners must create a new seed on patched hardware and migrate their funds.

The incident raises questions about whether hardware wallets can be trusted as the sole custodial layer for significant BTC holdings. Coinkite believes an attacker used AI to discover the flaw, which its own AI review missed weeks earlier.