Coinkite has shipped emergency firmware for its Coldcard hardware wallets after attackers spent weeks draining Bitcoin from devices affected by a seed-generation flaw dating back to 2021. The vulnerability, which reduced key entropy from a full 128 bits down to roughly 40 bits on affected units, let attackers guess private keys with far less computational effort than a properly randomized wallet should require.
The thefts unfolded in escalating waves. An initial attack in July 2026 pulled 594 BTC, worth about $38 million, from roughly 500 wallets in just 25 minutes. By early August, cumulative losses had climbed to about $88.6 million across 4,585 addresses, and by August 14 a third wave pushed the running total past 1,778 BTC, or roughly $112 million, before losses finally settled near $130 million overall.
How the flaw was found — and possibly exploited
Coinkite said its own three-week internal review, conducted with outside security researchers and AI models including Kimi, traced the root cause to insufficient randomness in older firmware's seed generation routine. The company suggested attackers may have used AI tools to comb through Coldcard's open-source firmware history to spot the weakness, a detail that underscores how automated code analysis is changing the economics of vulnerability discovery for both defenders and attackers.
What the new firmware changes
Firmware versions 5.6.1 for the Mk4 and Mk5 models and 1.5.1Q for the Q model, released August 21, now require users to manually contribute entropy when generating a new seed — at least 65 key presses, 50 dice rolls, or 128 coin flips, combined with the device's own random number generator. The same review also hardened transaction-signing, patched USB data-handling issues, tightened firmware validation, and reinforced Delta Mode and wallet-backup security; Coldcard now checks partially signed Bitcoin transactions immediately before signing to close off a theoretical USB-based attack path.
"We are grateful to the security researchers who went above and beyond over the past weeks," Coinkite said.
How Coldcard's flaw compares to other wallet security incidents
The episode has drawn comparisons to a separate, unrelated class of hardware-wallet vulnerability disclosed by rival Ledger, whose security team demonstrated it could physically extract a seed from a stolen Trezor device in under five minutes using about $100 of equipment, a flaw Trezor said could not be patched in firmware. Ledger has said no one has extracted a seed from its own devices without the PIN through any publicly known exploit, and it maintains its products were unaffected by Coldcard's entropy bug. Ledger CTO Charles Guillemet said of the Coldcard incident, "We're treating this as a serious reminder of how the whole security" landscape for self-custody hardware still depends on implementation details that are invisible to the end user.
The pattern of high-value, code-level failures recurring across the industry echoes other 2026 incidents; see BounceBit Shuts Down Its L1 After $286.5M BB Token Exploit for a similar case where an undetected flaw led to a nine-figure loss before it was caught.
Related: BounceBit Shuts Down Its L1 After $286.5M BB Token Exploit
Coinkite is urging every affected user to generate a fresh seed on the updated firmware and migrate funds to new addresses, since old seeds generated under the flawed randomness routine remain guessable regardless of the patch. The company said law enforcement is continuing to investigate the thefts and try to identify those responsible, though recovery of stolen funds from Bitcoin's public ledger remains unlikely once coins have moved through several hops.
