$38M in Bitcoin Drained by Coldcard Key Flaw Its Maker Thinks AI Found

COLDCARD Mk3 Security Advisory

If you generated a seed on a Mk3 after firmware 4.0.1, your funds may be at risk.

Mk4, Q and Mk5 are not affected based on our early analysis.

Coinkite said it has to assume "someone used AI to review previous versions of our firmware" in order to uncover the flaw. The firm said it had run one of the best available models over its own code a few weeks earlier, and the model "did not find this bug or anything serious." Attackers and defenders have the same tools, it wrote, but this time "it did not help us, and only helped the bad guys."

Coldcard's firmware calls a function to fetch randomness, and two implementations of it sat in the codebase with identical signatures: the hardware generator Coinkite wrote, and a software fallback inherited from MicroPython. A preprocessor guard checked only whether a setting was defined, without testing its value, so the build completed against the fallback without complaint. Seed generation had been drawing on it since a March 2021 migration.

Every current model is affected to some degree. Coinkite estimates the effective search space for an Mk3 seed at about 40 bits, against the 128 a seed is meant to have. Extra entropy from the secure elements on the Mk4, Q and Mk5 lifts theirs to roughly 72 bits, which the company says materially improves the position without reaching the target. Tapsigner, Opendime and Satscard use different code and are unaffected.

Coinkite has shipped an emergency hotfix, version 5.6.0 for the Mk4 and Mk5 and 1.5.0Q for the Q. Updating does not repair a seed already created on affected firmware. Owners need a new seed generated on patched hardware, and the company recommends a strong BIP-39 passphrase, at least 99 dice rolls, or both. Mk3 owners, whose model is out of support, are pointed to a separate migration path.

1/ Earlier today, our Bitcoin engineering and security teams at Block began investigating reports of non-Bitkey wallets being drained. To proactively protect our customers, we began investigating immediately. Here’s what we found 🧵