Technical Root Cause: Entropy Collapse
Published 8/2/2026, 10:22:18 AM
Between July 30 and August 1, 2026, hackers exploited a critical firmware vulnerability in Coldcard hardware wallets to drain 1,367.05 BTC (approximately $88.6 million) from 4,585 unique addresses [Source: https://blog.coinkite.com/coldcard-mk3-seed-generation-warning/]. The theft was made possible by a flaw in the wallet's Random Number Generator (RNG) that reduced the entropy of generated seeds from 128 bits to roughly 40 bits, making them computationally guessable [Source: https://engineering.block.xyz/blog/predictable-rng-fallback-and-32-bit-reseed-in-coldcard-firmware].
Technical Root Cause: Entropy Collapse
The exploit targeted a configuration error introduced in firmware version 4.0.0 (March 2021). A macro intended to enable the hardware security chip's RNG was incorrectly defined, causing the device to silently fall back to a weak software-based Pseudorandom Number Generator (PRNG) called "Yasmarang" [Source: https://engineering.block.xyz/blog/predictable-rng-fallback-and-32-bit-reseed-in-coldcard-firmware].
- Predictability: The fallback PRNG was initialized using only the chip's unique ID and timer registers.
- Brute Force: Because the entropy was reduced to ~40 bits, attackers could pre-calculate candidate seeds offline and scan the blockchain for matching funded addresses [Source: https://blog.coinkite.com/coldcard-mk3-seed-generation-warning/].
- AI Discovery: Coinkite leadership suggested the vulnerability, which had existed for five years, was likely discovered using AI-assisted code review [Source: https://blog.coinkite.com/coldcard-mk3-seed-generation-warning/].
Timeline of the Drain
The hackers executed the theft in three distinct waves, targeting different balance tiers and address types.
| Wave | Date (2026) | BTC Stolen | Addresses Impacted | Characteristics |
|---|---|---|---|---|
| Wave 1 | July 30 | ~1,083 BTC | 1,196 | Targeted high-value wallets (~1 BTC avg) in a 41-minute sweep. |
| Wave 2 | July 31 | ~76 BTC | ~1,477 | Occurred 27 hours after Wave 1. |
| Wave 3 | Aug 1 | 207.7 BTC | 1,912 | Targeted smaller balances (~0.1 BTC avg) using P2WSH outputs. |
As of August 2, 2026, the stolen funds remain unspent across seven attacker-controlled addresses, with the primary consolidation address identified as bc1qq85v2c926eg6pgxhwp6q7lf6cnsz80qs3fcu9r [Source: https://twitter.com/glxyresearch].
Vulnerability and Mitigation
The vulnerability primarily affected Coldcard Mk3 devices running firmware versions between 4.0.0 and 4.1.9.
Who was safe?
- Dice Rolls: Users who added 50+ manual dice rolls during setup were protected because the manual entropy bypassed the flawed PRNG path [Source: https://blog.coinkite.com/coldcard-mk3-seed-generation-warning/].
- Passphrases: Users employing a strong BIP-39 passphrase were safe, as the passphrase creates a unique wallet that cannot be reached even if the base seed is compromised.
- Mk4 Users: The Mk4 hardware uses a different architecture that was not susceptible to this specific RNG fallback bug.
Critical Warning: While Coinkite released emergency firmware (v4.2.0+) to fix the RNG path, updating the firmware does not secure an existing compromised seed. Any seed generated on the vulnerable firmware must be abandoned and funds moved to a new seed generated with verified entropy [Source: https://blog.coinkite.com/coldcard-mk3-seed-generation-warning/].