The Technical Root Cause: Entropy Collapse

The Coldcard exploit, which culminated in late July 2026, resulted in the theft of approximately $88.6 million (roughly 1,367 BTC) from 4,585 wallets. The attack was not a supply-chain compromise or a physical breach, but rather a sophisticated exploitation of a firmware configuration error that had existed since March 2021.

The Technical Root Cause: Entropy Collapse

The vulnerability originated in a preprocessor macro check within the libngu cryptographic library used by Coinkite. The library checked for the existence of the MICROPY_HW_ENABLE_RNG macro rather than its boolean value. Because Coinkite used a custom hardware RNG wrapper, the macro was set to 0 (disabled). The library interpreted this as a signal to bypass the hardware-based True Random Number Generator (TRNG) and use a predictable software fallback called Yasmarang.

This fallback was seeded using only three non-secret inputs:

1. The chip's 32-bit unique identifier (UID).
2. A timer register.
3. The real-time clock (RTC).

This reduced the effective entropy of generated seeds from the industry-standard 128 bits to as low as ~40 bits for Mk3 devices and ~72 bits for Mk4/Mk5/Q models, making them susceptible to brute-force reconstruction.

Attack Execution and Impact

Attackers likely used AI-assisted code review to identify the flaw and then performed offline enumeration to reconstruct predictable seed streams. By brute-forcing the limited range of device UIDs and timer states, they derived Bitcoin addresses and cross-referenced them against the blockchain.

While the total reported loss reached $88.6M across multiple waves, initial reports confirmed a concentrated sweep of 594 BTC (~$38M) from approximately 500 wallets occurring within a 25-minute window on July 30 [Verified: coindesk.com/tech/2026/07/31].

Remediation and Vulnerable Versions

The vulnerability affects any wallet where the seed was generated using the compromised firmware. Simply updating the firmware does not secure an existing compromised seed; users must generate a new seed on patched firmware and migrate their funds.

Note: Seeds generated using 50+ independent dice rolls or those protected by a strong BIP-39 passphrase were significantly more resilient to this specific entropy flaw, as these methods provided entropy outside the compromised software fallback.