Coldcard entropy bug drains 2,000 Bitcoin
- A MicroPython entropy bug in Coldcard wallets allowed AI-assisted thieves to drain 2,000 Bitcoin.
- Block engineering logs linked the attacker's search queries directly to federal law enforcement targets.
- Developers are shifting to multi-vendor hardware setups to eliminate single points of failure.
Coldcard’s gold-standard reputation in Bitcoin self-custody collapsed into a 20-bit cryptographic failure.
On What Bitcoin Did, Frostsnap developers Lloyd Fournier and Nick Farrow detailed how manufacturer CoinKite bypassed hardware-level random number generation on Coldcard Mark III devices. Firmware routed key generation through "Yasmerang," a MicroPython toy algorithm, rather than pulling entropy directly from the hardware chip. That implementation collapsed key security from 256 bits to roughly 20 bits, shrinking the search space to a few hundred million possibilities. Attackers used large language models like Kimi K3 to map vulnerable keys and sweep 2,000 Bitcoin from 1,200 wallets.
"Instead of pulling true entropy directly from the hardware chip, the device routed randomness through 'Yasmerang' - a toy algorithm written in MicroPython."
- Lloyd Fournier, What Bitcoin Did
The digital paper trail led straight to commercial data logs. On Bitcoin And, Block engineering lead Clay Garrett revealed that the attacker searched target wallet addresses using a paid subscription at a commercial data vendor. Vendor logs matched the precise timing of the on-chain sweeps, prompting Block to hand subscriber records over to federal investigators while Galaxy Digital tracked the stolen funds sitting in visible address clusters.
Hardware teams are scrambling to adapt as AI models accelerate exploit development. On BTC Sessions, Foundation Devices CEO Zach Herbert explained that automated tools are flooding wallet teams with AI-generated bug reports, forcing developers to integrate automated code reviews directly into their firmware release pipelines.
"Security researchers and regular users alike are flooding hardware vendors with AI-generated bug reports."
- Zach Herbert, BTC Sessions
The crisis reignited a sharp debate over friction versus security. SeedSigner maintainers urged hardware makers on BTC Sessions to force users into generating entropy manually with physical dice. Developers from Trezor and Blockstream warned that mandatory manual setups create steep learning curves, driving average users away from self-custody and into custodial spot ETFs.
Multi-vendor multi-signature arrangements emerged as the primary defense against single-vendor firmware flaws. Signers who split quorums across distinct hardware brands survived the Coldcard flaw without losing funds. Newer protocols like Frostsnap take the concept further by mixing randomness between a mobile app and a hardware chip, ensuring neither device can predict the resulting private key alone.
Passive self-custody on a single hardware vendor is no longer enough.