A five-year-old Coldcard software flaw may have allowed an attacker to reconstruct private keys and sweep more than 1,100 bitcoin, prompting the wallet’s maker to blame the discovery partly on artificial intelligence (AI).
Key Takeaways
Coldcard-linked seeds exposed 1,128.4717 BTC worth about $71.1 million.Coinkite says AI may have found the five-year flaw, but attribution remains unproven.Coldcard users with affected seeds must create new wallets on fixed firmware.Most of the funds were consolidated into an address holding hundreds of bitcoin, where a large portion remained largely stationary. The affected addresses were linked by one important detail: Their recovery seeds had been created on Coldcard hardware wallets manufactured by Canadian company Coinkite.
A recovery seed is a list of words that controls access to a cryptocurrency wallet. Anyone who can reconstruct or obtain that seed can usually move the wallet’s funds without possessing the physical device.
Coldcard Finds a Broken Randomness SystemThe flaw involved the process used to generate random data. Secure wallets depend on high-quality randomness so that their recovery seeds cannot be guessed. On the most seriously affected Mk3 devices, researchers estimated that the seed may have contained only about 40 bits of effective randomness instead of the intended 128 bits.
That difference is critical. A properly generated 128-bit seed is considered practically impossible to guess through brute force. A 40-bit seed offers dramatically fewer possibilities, allowing an attacker with enough computing power to test potential seeds offline and compare the resulting addresses with the public Bitcoin blockchain.
One Configuration Error Survived for 5 YearsThe problem began with a build-time configuration mistake involving two software functions that performed similar jobs. One function used the device’s hardware-based true random number generator, while the other relied on a weaker software process inherited from MicroPython.
Coinkite intended to disable the MicroPython option. However, a software check looked only at whether a configuration label had been defined, rather than whether its value had been set to zero. As a result, the finished firmware could silently select the weaker function.
Because the two functions had matching formats, the software continued to compile and run without producing an obvious error. The mistake entered the code around a 2021 software migration and remained in publicly available firmware for more than five years.
Updating a device now does not strengthen a seed that was generated under the faulty software. Affected users must create a completely new seed using corrected firmware or another secure device, then move their funds to addresses controlled by that new seed.
Users who added at least 50 independent dice rolls while creating their seed may have supplied enough extra randomness to avoid the weakness. A strong BIP-39 passphrase could also have made reconstruction more difficult, while wallets requiring signatures from several independent devices may have prevented one compromised seed from moving funds alone.
Coinkite Points to AI, but Proof Remains MissingCoinkite CEO Rodolfo Novak apologized publicly and said the company took full responsibility for the firmware failure. He said the team was working on fixed software, technical reports, and support for affected users.
Coinkite and Novak also advanced a striking theory about how the flaw was discovered. Because its firmware had been publicly available for years, the company said it believed someone may have used AI to examine older versions of the code and locate the weak randomness path.
Some observers leveraged top AI models to find the Coldcard exploit on their own. Image source: X The opposing views are not necessarily incompatible. A human error created the vulnerability and allowed it to persist, while AI may have lowered the cost of finding, understanding, or exploiting it. Defenders must identify every dangerous weakness, while an attacker needs to locate only one.
The incident also challenges assumptions about open-source security. Public code allows independent experts to inspect software, but availability alone does not guarantee that someone will review the correct section, recognize a subtle defect, and report it before an attacker acts.
For Coldcard users, the immediate priority is determining when and how their seed was created. Anyone with an affected seed must verify instructions through official Coinkite channels, install corrected firmware, create a new seed, and move funds carefully while watching for phishing attempts and fake support messages.
