The Bitcoin community is dealing with one of the most severe security events recorded in the cold-wallet sector. Over the course of several attack waves, more than 1,367 Bitcoins, worth approximately $88 million, were stolen from 4,585 different addresses created using Coldcard hardware wallets manufactured by the Canadian company Coinkite.
The incident did not stem from a breach of the Bitcoin network itself, but from a flaw in the wallet's internal software, which caused some devices to generate private keys with an excessively low level of randomness. Simply put, code that was supposed to create a secret that is almost impossible to guess produced, in some cases, a more predictable secret that could be reconstructed using computing power and automated scanning.
The damage continues to expand, and research firms warn that users who created wallets using vulnerable versions may still be exposed, even if their funds have not yet been stolen.
Hundreds of wallets emptied in 25 minutes
The first attack wave was particularly fast and coordinated. Within just about 25 minutes, hundreds of Bitcoins were stolen from separate wallets, with transactions crammed into a small number of network blocks. The attacker apparently pre-scanned addresses that were likely to be vulnerable, calculated the corresponding keys, and triggered an automated process to drain the wallets.
In the initial stage, most of the stolen funds were concentrated in a small number of addresses, making them relatively easy for blockchain researchers to track; however, the method of operation later changed.
In the third wave of the attack, approximately 208 additional Bitcoins were stolen from 1,912 addresses, but this time the average theft amount per victim was much smaller. According to Galaxy Research, this may indicate that the attacker had already drained the wealthier addresses and was now running scanners on any possible balance, even if only fractions of a Bitcoin.
How a software flaw rendered a cold wallet vulnerable
To understand the failure, one must understand how a Bitcoin wallet is generated. When setting up a new wallet, the device generates a backup phrase known as a seed phrase. From this word combination, the private keys that allow control over the coins are derived.
The system's security depends on very high randomness. The larger the range of possibilities, the harder it is for an attacker to guess the word combination or the key.
According to the published technical analysis, a configuration fault in Coldcard caused the hardware random number generator to fail to operate as intended. Instead, the system relied on a weaker software generator, which used data such as the chip's serial number and the internal clock as its starting point.
This data is not truly secret. An attacker with appropriate knowledge can narrow down the range of possibilities, perform extensive calculations, and search for matches to existing addresses on the blockchain. According to reports, the bug entered the code in version 4.0.0, which was released in March 2021, and remained in additional versions for years.
Not all models were exposed to the same degree
The extent of exposure varies among different Coldcard models. In the Mk2 and Mk3 models, the effective level of randomness dropped particularly sharply, according to estimates. In newer models, including the Mk4, Q, and Mk5, an additional security component exists that adds randomness to the process.
Coinkite claims that this component significantly improves protection. However, researchers presented a more cautious analysis, according to which even in the newer models, a limitation exists in how the system processes the additional randomness.
This does not mean that every new device was hacked or that every Coldcard user will lose their funds. But it does indicate that the scope of exposure is still not entirely clear, and therefore users cannot simply rely on the assumption that their model is safe without checking how and when the wallet was created.
Not a Bitcoin hack, but a failure in a product meant to protect it
Despite the scale of the theft, it is important to clarify that the Bitcoin network itself is operating as usual. The transactions were signed using valid private keys, after the attacker apparently managed to reconstruct them due to the weakness in how they were generated. From the perspective of the Bitcoin network, these are completely valid transactions.
The event illustrates that self-custody does not end with purchasing a hardware wallet. It also requires trust in the manufacturer, in the code, in the key generation process, and in the user's ability to follow warnings and move quickly to a new wallet if necessary.
In this sense, this attack is not just a theft of tens of millions of dollars. It is a painful reminder that even a cold wallet is not a magic solution, and that in a world where users are their own bank, the responsibility for security does not disappear. It simply transfers into their hands.