Coldcard: Major security update implemented following a 130 billion won hacking incident

CoinKite, a manufacturer of Bitcoin hardware wallets, has recommended that users of the Coldcard Mk4, Mk5, and Q models immediately upgrade to firmware versions 5.6.1 and 1.5.1Q. This action follows a major hacking incident that exploited a seed generation flaw that has existed since 2021. As a result, CoinKite conducted an intensive security review for three weeks, involving external security researchers and the AI model "Kimi.". The core issue of this vulnerability lies in the lack of entropy. In some Coldcard devices, the randomness during seed generation was insufficient, causing a drastic drop in security strength from 128 bits to approximately 40 bits. This allowed attackers to infer the private key without physical access and steal the wallet. CoinKite suggested that the attacker may have analyzed older, open-source firmware versions using AI to discover these flaws. The attacks began in July, and the first attack alone resulted in the theft of approximately 594 BTC (worth about 38 billion won at the time) from around 500 wallets. Galaxy Research tracked that, as of early August, approximately $88.6 million (about 120 billion won) had been stolen from 4,585 addresses. They noted that the attacks were deliberate and carried out programmatically, and suggested the possible use of large language models (LLMs). On August 14th, a total of over 1,778 BTC, equivalent to approximately $112 million (about 150 billion won) at the time, was lost due to three major attacks and numerous smaller incidents. To date, the cumulative losses are estimated to be around $130 million (about 170 billion won). The new firmware fundamentally changes the seed generation method. Now, users must manually add randomness by either entering a 65-character key, rolling a die 50 times, or flipping a coin 128 times, and the device combines this user-provided randomness with its own internal randomness to generate the seed. Additionally, the existing Yasmarang pseudo-random number generator has been replaced with a SHA-256 Hash_DRBG, and a check function has been added to detect hardware random number generator failures. Users who generated seeds between 2021 and July 2026 must regenerate their seeds with the new firmware and transfer their assets to a new wallet. The security of Partially Signed Bitcoin Transaction (PSBT) has also been enhanced. Previously, there was a theoretical risk that a compromised computer connected via USB could modify a transaction before it was signed, after user confirmation. However, after the update, the integrity of the transaction is re-verified just before signing, and if any modification is detected, the signing process is halted, and a warning is displayed. CoinKite stated that this issue is only theoretical and that there have been no actual cases of exploitation. Charles Guillemet, CTO of Ledger, stated: