Coldcard Exploit: Seed Entropy Bug Cuts Search Space, Enables Private-Key Theft

Decrypt/coldcard exploit: Coinkite’s Coldcard hardware wallets suffered a firmware and key-generation flaw where seed randomness was sourced from a software PRNG (seeded deterministically) instead of the intended hardware random number generator. This “Coldcard exploit” effectively reduced the seed search space on affected older models from the target 128 bits down to about 40 bits (roughly a trillion possibilities), making private keys guessable. Galaxy Research tracked at least 1,596 BTC stolen across three confirmed waves, with a suspected fourth wave that could bring the total to about 2,055 BTC (~$130m at the time cited). One wave allegedly moved ~$70m in 41 minutes. Coinkite says at least 15 attacker groups participated. Mechanism: the integration moved seed generation onto libsecp256k1 and MicroPython’s fallback entropy (Yasmarang) on devices lacking proper randomness-chip usage. A build guard (#ifndef) passed incorrectly because the “off” setting was still “defined,” so the hardware entropy path was never called. Coinkite estimated newer models reached ~72 bits, still below the 128-bit standard. Fix and trader takeaway: affected users must update firmware, regenerate seeds, verify, create a test transaction, and move funds. Exporting a compromised seed to other wallet software does not fix the issue. For traders, the Coldcard exploit adds a real-world custodial/self-custody risk narrative to Bitcoin security and may increase short-term headline-driven volatility, while long-term confidence depends on remediation speed and confirmed loss containment.