Coldcard Firmware Flaw Exposes Cryptocurrency Storage Risks

A recent exploit of Coldcard's firmware highlights the importance of security in cryptocurrency storage.

The issue stems from a critical entropy-generation flaw affecting certain devices, which reduced the effective randomness behind seeds generated on those devices. This vulnerability allowed an attacker to silently generate broken keys for years without anyone noticing until funds started disappearing.

CoinKite, the manufacturer of Coldcard, confirmed the problem and advised users to update their firmware, generate a new seed, and migrate funds away from anything touched by the old one.

Security researcher 0xQuit broke down the technical root cause, explaining that bad randomness in Coldcard's seed generation process allowed roughly 594 BTC to be swept from around 500 addresses in a short window. He recommended using multi-device multisig with at least two different vendors, writing seeds only on paper, and splitting them geographically using Shamir secret sharing.

Block's investigation found that the attack was still live and confirmed that no Block products were affected. However, they continued investigating to protect the broader self-custody community. The investigation revealed a mistake in a firmware macro that caused it to rely on a known device ID, timer state, and call history instead of a hardware random number generator.

Binance founder Changpeng Zhao weighed in, stating that even hardware wallets and long-established wallets can have bugs. He advised crypto holders to consider splitting their funds across multiple wallets as mitigation.