A five-year-old firmware bug in Coldcard hardware wallets has led to over $100 million in Bitcoin being stolen across multiple attack waves. The flaw caused devices to use a weak random number generator, allowing attackers to reconstruct private keys. The exploit, affecting thousands of users, has prompted manufacturer Coinkite to issue patches and has triggered a market reaction not seen since the FTX collapse, reigniting debates on self-custody.
Coldcard vulnerability discovery
- ▪A firmware flaw in Coinkite's Coldcard hardware wallets, originating in a March 2021 build, allowed attackers to reconstruct Bitcoin private keys offline
- ▪The vulnerability affects Coldcard's Mk2, Mk3, Mk4, Mk5, and Q devices with single-key seeds, but not multisignature setups
Random number generator flaw
- ▪The firmware error caused devices to use a predictable software randomizer (MicroPython's Yasmarang) instead of the intended hardware random number generator (RNG)
- ▪The flaw reduced the effective entropy from a target of 128 bits to as low as 40-72 bits, allowing attackers to brute-force seed phrases
Attack timeline
- ▪A fourth attack wave used Bitcoin's "replace-by-fee" feature, giving some victims a chance to outbid the attacker and save their funds
- ▪The first attack wave began on July 30, 2026, with subsequent waves continuing through at least August 2, 2026
Theft losses
- ▪The loss profile consists mainly of many small, individual self-custody accounts, not large institutional holdings
- ▪Confirmed losses from the exploit have exceeded $100 million, with 1,596 BTC stolen from approximately 7,300 addresses across multiple incidents
- ▪Including a suspected but unconfirmed fourth wave, Galaxy Research estimates total losses could reach 2,055 BTC, worth about $130 million
Coinkite disclosure response
- ▪Coinkite, the maker of Coldcard, acknowledged the bug, released emergency firmware patches, and advised users to move funds to new wallets
- ▪Coinkite initially understated the scope of the vulnerability, first claiming only Mk3 devices were affected before including Mk4, Mk5, and Q models
- ▪Some users reported their devices "bricking" during the new firmware update process, complicating the recovery of funds
Market reaction and investigation
- ▪As of August 4, 2026, 90% of the stolen Bitcoin remained unmoved from the initial attacker addresses
- ▪In a reversal of the post-FTX trend, some users moved funds from self-custody onto centralized exchanges for perceived safety
- ▪Attacker and victim addresses have been shared with US federal law enforcement, and blockchain analysis firms are monitoring the stolen funds
- ▪The incident reignited a debate on the risks of self-custody, with some advocating for wallet diversification or the use of centralized platforms
- ▪The exploit triggered a spike in small Bitcoin transfers to 39,600 BTC on July 31, a level not seen since the 2022 FTX collapse
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