TL;DR:
- A flaw in Coldcard’s random number generator went undetected for five years and has already compromised nearly $90 million in Bitcoin.
- Kraken’s chief security officer noted that auditors verified the correct generator existed, but not that it was the one the firmware actually executed.
- Coinkite halted all device shipments and destroyed units with affected firmware, though it advises users not to discard compromised devices.
A vulnerability in the seed generation process of Coldcard remained active for five years without being detected by any independent audit, according to a disclosure by manufacturer Coinkite.
The flaw was introduced in March 2021 during the integration of a new cryptographic library. It redirected the wallet creation process toward a MicroPython pseudorandom generator present in the source code, instead of the true random number generator (TRNG) designed for that function. As of Sunday, more than 4,500 addresses from Coldcard had been compromised, with losses estimated at around $90 million in Bitcoin.
— Nick Percoco (@c7five) August 2, 2026
Why Nobody Detected the Bug in Coldcard
Nick Percoco, chief security officer at Kraken, posted on X that the incident should serve as a wake-up call for the entire hardware wallet industry. According to Percoco, the underlying problem was not just the bug itself, but the absence of a verification process confirming that the approved entropy source is indeed the one the firmware executes in production. “Consumers must trust the manufacturer’s implementation of the system’s most critical function, with no independent verification that the approved entropy path is the one actually executed,” he stated.
The reason the flaw in Coldcard escaped review for so long is technically revealing: the TRNG code existed and functioned within the system, so audits confirmed it as present and operational. However, no one verified that this generator was the one the firmware called at the critical moment of seed creation. The presence of the correct component concealed the fact that it was not the component in use.
Standards the Crypto Industry Still Ignores
Percoco noted that this type of end-to-end verification is already mandatory in other industries. He cited the U.S. government’s NIST SP 800-90B standard and Germany’s BSI AIS-31 as frameworks that require the design, testing, and validation of physical random number generators for cryptographic use.
No equivalent process exists in the hardware wallet industry: available certification schemes, such as Common Criteria or manufacturer-sponsored audits, do not require systematically verifying that the validated entropy source is the one the production firmware actually invokes.
Coinkite reported that it destroyed all units with affected firmware at its facilities and suspended all shipments as of Thursday. Nevertheless, it advised users with compromised devices not to discard their Coldcards, as they may be needed if fund recovery becomes possible. The company also indicated that its legal team will coordinate with law enforcement across multiple jurisdictions to identify those responsible.
