Coldcard Firmware Flaw Exposes Weakness in Self-Custody

A recent security issue has led Bitcoin users to reevaluate the concept of self-custody and how it relates to hardware wallet firmware. The problem began in July, when a 'low-entropy' issue was discovered in Coldcard's firmware starting from version 4.0.1 (released March 2021).

The issue lies in the use of MicroPython's Yasmarang PRNG instead of relying on the device's STM32 hardware RNG. Coinkite estimated that affected Coldcard models produced seeds with roughly 40 bits of entropy for Mk2 and Mk3, or around 70 bits for Mk4, Mk5, and Q.

These figures fall short of the 128-bit level generally considered sufficient for a secure 12-word seed phrase. As a result, attackers were able to brute-force private keys, resulting in thefts exceeding $100 million worth of BTC.

The incident has reignited debate about what it means to 'verify' secure entropy and how much should be outsourced to hardware versus performed by the user. Some users who generated seed phrases using sufficient physical entropy have argued that this reduces reliance on the compromised randomness path.