A five-year-old firmware flaw in Coldcard Bitcoin hardware wallets has enabled attackers to drain tens of millions of dollars in Bitcoin this week, with estimated losses climbing past $100 million and the exploit still active as of August 4, 2026.
The issue centers on Coinkite’s Coldcard devices, popular air-gapped Bitcoin-only hardware wallets. Starting around July 30, coordinated on-chain sweeps began emptying vulnerable single-signature addresses. The first major wave moved roughly 1,082–1,083 BTC (about $70 million at the time) from more than 1,100 addresses in under an hour. Subsequent waves followed, and by early August researchers were tracking totals in the range of 1,367 to over 1,800 BTC across thousands of addresses, with some estimates (including suspected additional activity) reaching around 2,055 BTC or roughly $114–130 million depending on Bitcoin’s price and confirmation of further sweeps.
The Technical Problem
The root cause is a March 2021 firmware integration error (introduced around version 4.0.0/4.0.1). During a code rewrite that incorporated libsecp256k1, seed generation was unintentionally routed away from the device’s STM32 hardware true random number generator to a deterministic software pseudorandom number generator (MicroPython’s Yasmarang fallback).
This drastically reduced entropy. Affected Mk2 and Mk3 devices running firmware 4.0.1 through 4.1.9 produced seeds with roughly 40 bits of entropy in some analyses (or around 72 bits in others), far below the expected 128 bits. Later models (Mk4, Mk5, and Q) before the July 2026 fixes carried reduced entropy as well (around 72 bits in reports). The resulting search space became computationally feasible for attackers with sufficient resources, allowing them to regenerate candidate private keys offline, match them against blockchain addresses holding funds, and sweep the coins—without physical access to any device, malware, or phishing.
Seeds created with sufficient additional entropy (at least 50 independent physical dice rolls entered during setup) or protected by a strong, unique BIP-39 passphrase are generally considered outside the vulnerable set. Other Coinkite products such as Tapsigner, Opendime, and Satscard use different codebases and are unaffected.
Company Response and User Guidance
Coinkite confirmed the vulnerability, issued security advisories, and released patched firmware shortly after the attacks became public (version 4.2.0 or later for Mk3, 5.6.0 or later for Mk4/Mk5, 1.5.0Q or later for Q, with corresponding Edge fixes). The company halted shipments and destroyed remaining inventory of devices that had shipped with vulnerable firmware.
Critically, installing the new firmware does not repair an existing weak seed. Users whose seeds were generated on affected firmware (without the dice-roll or strong-passphrase protections) are advised to:
- Update to the fixed firmware.
- Generate an entirely new seed on the patched device.
- Verify a receiving address carefully.
- Move funds (starting with a small test transaction) to the new wallet.
Coinkite has been contacting customers, assisting with migrations where possible, and urging owners to retain devices in case of any future recovery efforts involving law enforcement. The company has publicly acknowledged the impact on users and trust.
Ongoing Situation
Researchers, including Galaxy Research, have described the exploit as ongoing, with multiple waves observed and additional activity continuing into early August. Patterns suggest programmatic, possibly AI-assisted key generation and sweeping. Stolen coins have largely remained unmoved in attacker-controlled addresses so far, complicating laundering but leaving them visible on the public blockchain.
The incident has prompted broader discussion in the Bitcoin community about hardware wallet entropy practices, the value of multisignature setups, dice rolls or external entropy sources, passphrases, and the limits of even well-regarded open-source devices. Coinkite and others have noted that AI-assisted code review tools (including those tested after the fact) also missed the subtle build-system/submodule boundary error that introduced the fallback path.
Affected users who have not yet migrated are strongly urged to treat the situation as urgent and move funds to new seeds generated under fixed conditions. The full scope of remaining vulnerable addresses continues to be assessed through on-chain analysis.
