Coldcard Vulnerability Drains $70M From Bitcoin Wallets

Steady attention without excessive speculation.

The flaw sits in firmware for Coinkite’s Coldcard hardware wallets. It weakened random seed generation, so attackers could rebuild private keys offline and sweep the funds. Coldcard has long ranked among the most trusted Bitcoin self-custody devices.

How the Coldcard Vulnerability Worked

A Coldcard normally builds its seed using a hardware true random number generator, or TRNG. That chip produces strong, unpredictable entropy.

Around March 2021, a firmware change broke that path. Because of a faulty code guard, seed generation quietly fell back to a weak software random generator from MicroPython.

As a result, entropy collapsed. On the Mk2 and Mk3, effective randomness dropped to roughly 40 bits instead of the intended 128.

That gap matters enormously. At 40 bits, a determined attacker can simply enumerate the possible seeds offline and match them to funded addresses.

Later models fared better, but not well enough. On the Mk4, Mk5, and Q, entropy reportedly fell to around 72 bits, according to Coinkite’s technical backgrounder.

Inside the 41-Minute Drain

The main attack unfolded fast. On July 30, 2026, attackers swept 1,196 addresses between roughly 01:10 and 01:51 UTC.

Galaxy Research mapped the flow. In total, the firm tracked 1,082.65 BTC drained in full, worth about $70.2 million at the time.

The transactions shared a clear signature. Each one used an identical 30 sat/vB fee, left no change output, and emptied the address completely.

That pattern helped researchers connect the theft. Engineers at Block first flagged it, and Galaxy then built on their work to trace the funds.

The sweeps also beat the public warning by roughly 30 hours. So many victims learned of the Coldcard vulnerability only after their Bitcoin was gone.

The stolen Bitcoin then pooled into a handful of wallets. One consolidation address, bc1qq85v2c9, held about 562 BTC in early reports, and the funds stayed largely unspent.

Losses have kept climbing since. By August 1 to 2, on-chain trackers counted about 1,367 BTC, near $88.6 million, across roughly 4,585 addresses.

Coinkite Takes Responsibility

Coinkite did not dodge the blame. The company issued advisories, accepted responsibility for the firmware bug, and pushed emergency fixed firmware.

According to Coinkite, the flaw may have surfaced through AI-assisted review of its open-source code. “Both attackers and defenders have the same AI tools, but today it did not help us, and only helped the bad guys,” the company wrote.

Founder Rodolfo Novak, known as NVK, struck a somber tone. “Devastated, but my focus right now is on helping ppl rotate keys,” he wrote on X.

The attackers remain unidentified. Still, Block engineers noted they may have used a paid blockchain data provider account to find funded addresses.

Coinkite’s early scope also proved too narrow. At first the company treated later models as safe, then it widened the warning as evidence grew.

Why Updating Firmware Is Not Enough

Here is the hard part. Updating firmware does not repair a seed that already carries weak entropy.

So a patched device can still hold a vulnerable key. To get safe, users must generate a fresh seed on fixed firmware and then move their funds across.

Coinkite has shipped those fixes. The patched versions include Mk3 4.2.0, Mk4 and Mk5 5.6.0, and Q 1.5.0Q.

Extra entropy also helps a lot. Seeds built with at least 50 private dice rolls, or protected by a strong BIP-39 passphrase, sit far out of reach.

The Self-Custody Debate Reignites

The theft reopened an old argument. Critics quickly seized on it as proof that hardware wallets can fail.

Experts pushed back just as fast. They stressed that the attack never touched a device, and that fixed firmware plus a new seed restores security. As CoinDesk put it, the keys were rebuilt entirely offline.

Changpeng Zhao, the former Binance chief known as CZ, urged holders to split their funds. “Nothing is 100%,” he warned, according to Decrypt.

Others pointed to better habits. Multisig setups, external dice entropy, and unique passphrases would have shielded many affected wallets.

What Coldcard Holders Should Do Now

The Coldcard vulnerability is not fully contained. Because unmigrated seeds stay exposed, the exploit could keep draining wallets in the days ahead.

Affected users should act now. First, update to the fixed firmware. Then generate a brand new seed, and migrate funds with a small test transaction before moving everything.

Long-term single-sig holders face the highest risk. Anyone who set up a Coldcard seed on version 4.0.1 or later should treat their funds as exposed. This is especially true for seeds made without dice rolls or a passphrase.

None of this counts as financial advice. Still, when private keys are on the line, moving early beats waiting. You can follow migration steps in Coinkite’s official advisory.