Published July 31, 2026
On July 30, Coinkite disclosed a flaw in how COLDCARD hardware wallets generated seed phrases. Independent researchers at Block confirmed the root cause the same day. In the hours before the disclosure, roughly 594 bitcoin, worth about $38 million, was swept from around 500 single-signature wallets.
This page is our reference explanation of what happened, who is affected, and what to do about it. Please continue to check Coinkite’s official blog for ongoing updates: https://blog.coinkite.com/.
We are financial advisors, not cryptographers or security researchers. Everything here is drawn from the cited sources and represents our best effort to inform bitcoin holders based on what is currently known. Some of it may prove to be incomplete, incorrect, or superseded. This is an evolving situation.
If you hold bitcoin on a COLDCARD, read the section on who is affected carefully. The answer depends on a narrower question than most people assume.
WHAT ACTUALLY WENT WRONG
A Bitcoin seed phrase is generated from randomness. That randomness is the only thing standing between your funds and anyone who wants them. There are more possible seeds than atoms in the observable universe, which is what makes guessing one impossible. But that guarantee rests entirely on the randomness being genuinely unpredictable.
COLDCARD devices contain a dedicated hardware random number generator built into the microcontroller. That is the component the device was designed to use, and it is one of the reasons the product earned its reputation.
It was not the component being used.
A build configuration setting told the device to skip its own hardware generator. A check in a supporting software library then tested only whether that setting existed rather than whether it was switched on. The build succeeded, no error was raised, and seed generation quietly fell through to a basic software substitute borrowed from an unrelated code library.
That substitute was initialized from the microcontroller’s factory-set hardware ID and its internal clock registers. Neither of those is secret. The hardware ID is fixed manufacturing metadata. The clock values are timing state that an attacker can narrow down, or simply measure on an identical device they purchase themselves.
The result is a seed phrase that looks perfectly random and is not. Instead of one candidate among an unimaginable number, it becomes a solvable problem.
Coinkite has published a technical backgrounder explaining the failure in their own words. Block’s engineering team has published a detailed independent analysis with source-level references. Both are worth reading if you want the full picture.
THE QUESTION THAT MATTERS
The instinct is to ask “do I own an affected COLDCARD?” That is the wrong question.
Exposure depends on the firmware that was running when your seed was created. Not the model you own. Not the firmware on it today. Not when you bought it.
Updating your firmware does not repair a seed that was already generated. The weakness is baked into the seed itself. Restoring that seed onto a brand new device does not strengthen it, and exporting it to a different wallet carries the flaw along with it.
The flaw entered production firmware in March 2021 and went undetected for more than five years.
WHO IS AFFECTED
| Device | Firmware when the seed was created | Assessment |
|---|---|---|
| Mk1 | All released firmware | Outside this issue |
| Mk2 / Mk3 | Through v3.2.2 | Used the hardware generator as intended |
| Mk2 / Mk3 | v4.0.0 through v5.0.3 | Confirmed vulnerable, no secure reseed |
| Mk4 / Mk5 | Before v5.6.0 | Vulnerable, partially mitigated |
| Q | Before v1.5.0Q | Vulnerable, partially mitigated |
A note on the newer devices. Coinkite’s first advisory, focused on the Mk3, stated that the Mk4, Q, and Mk5 were not affected. Their own technical backgrounder published later on the same day tells a different story, recommending that owners of every model generate a new seed on patched firmware.
The distinction is one of degree. Mk4, Q, and Mk5 devices mix additional randomness from their secure elements at startup, which improves the situation. Coinkite estimates the effective search space at roughly 40 bits on the Mk3 and roughly 72 bits on the newer models, against the 128-bit standard a seed phrase is supposed to provide. Block’s analysis is less forgiving, concluding that only four bytes of that secure element material actually reach the generator.
We are treating the technical backgrounder and the Block report as the operative guidance rather than the initial Mk3 advisory. Anyone whose seed was generated on any model before the July 30 hotfix should assume they are in scope until they can establish otherwise.
TAPSIGNER, OPENDIME, and SATSCARD are built on different codebases and are not affected.
WHAT MAY NOT BE AFFECTED
Several situations may fall outside this issue.
Seeds created with a BIP-39 passphrase. Coinkite’s early analysis indicates that an affected seed used with a strong, unique passphrase faces minimal risk from this flaw. A passphrase is not the device PIN. If you are unsure whether you set one, you almost certainly did not.
Seeds created with dice. COLDCARD has long supported entering your own randomness from a fair six-sided die. Because the flaw affected only the device-generated randomness, sufficient independent dice rolls continue to provide protection. On the Mk3 specifically, Coinkite notes that the dedicated dice-only import path hashes the roll sequence directly and never touches the device generator at all.
Seeds created before the vulnerable firmware window. Anything generated on firmware v3.2.2 or earlier reached the real hardware generator.
Multisignature arrangements with genuine device diversity. This is the important one, and it deserves its own section.
WHY MULTISIG MATTERS HERE
AnchorWatch CEO Rob Hamilton’s preliminary on-chain analysis identified 1,324 outputs swept across 500 transactions within a three-block window, totaling 594.48 bitcoin. The coins spanned 2021 through 2026. Every address involved was single-signature, and none were taproot. His read at the time was that the pattern pointed to flawed entropy somewhere in wallet generation, which the disclosures later that day confirmed.
In a single-signature wallet, one seed controls everything. If that seed can be reconstructed, there is no second approval layer and nothing to slow an attacker down.
A 2-of-3 multisignature vault requires two of three keys to move funds. If one key is generated on an affected COLDCARD and the other two are not, reconstructing that one key gets an attacker a single signature and no further. The structure absorbs the failure.
This protection is not automatic. Block’s report is explicit that if every key in the quorum came from a vulnerable device, the impact remains, and that a quorum of secure devices is what provides the protection. Multisig built entirely on one vendor’s hardware concentrates exactly the risk it was meant to distribute.
There is also an honest caveat. A 2-of-3 vault with one compromised key still holds, but it has spent its margin. It is designed to tolerate the loss of any one key, and until the affected key is replaced, that tolerance is gone. A weak key in a diverse quorum is a reason to move deliberately rather than to move fast. It is not a reason to do nothing.
The broader lesson is one we have built our custody practice around. Air-gapping a device limits exposure while signing, but it cannot help when the seed was predictable at the moment it was created. Any single vendor’s implementation is a point of failure that a client cannot audit. Distributing across vendors, codebases, and entropy methods is what turns a vendor failure into an inconvenience instead of a loss.
IF YOU MAY BE AFFECTED
Coinkite’s published guidance, summarized. The steps below are our summary of what Coinkite recommends. Their advisories are the authoritative version and you should work from those directly rather than from any summary, including this one.
- Update firmware before generating anything new. Version 5.6.0 or later for Mk4 and Mk5, version 1.5.0Q or later for Q. Mk3 owners should migrate to an unaffected device.
- Generate a completely new seed. Adding at least 99 independent dice rolls, a strong unique passphrase, or both is worth the effort.
- Record and verify the backup before any funds are involved.
- Verify the wallet fingerprint and a receive address on the device screen.
- Send a small test transaction and confirm it arrives.
- Only then move the remainder. Keep the old backup until the migration is complete and confirmed.
Move deliberately. A rushed migration introduces risks of its own, including mistyped addresses, an unverified backup, or a replacement wallet that is weaker than the one you left.
If you use a passphrase, note that every passphrase produces a valid wallet, including one containing a typo. Verify the fingerprint before depositing anything.
BE ON HIGH ALERT FOR SCAMS
Urgent security news is when seed phrase theft attempts spike, and this event has produced a large population of worried people primed to act quickly on an official-sounding message. Expect impersonation of Coinkite, of custody providers, and of advisors.
Do not enter your seed phrase into any website offering to check whether it is vulnerable. Several of these are already operating. There is no legitimate service that requires your seed words to answer that question.
No legitimate party will ever ask for your recovery phrase. Not Coinkite. Not your custody provider. Not us. A request for seed words is definitive proof that the request is fraudulent, regardless of how the message is branded or who it appears to come from.
Verify identity before acting on any communication about this. Use the verification process your provider publishes rather than contact details supplied in the message itself.
HOW WE ARE RESPONDING
The issue originated in COLDCARD firmware. Our work now is making sure we can help mitigate the potential negative ramifications of those affected quickly and accurately.
We are reaching out to clients directly. If you think a seed you or someone you know relies on may have been generated via defective firmware, please contact us.
We have opened availability through Monday. Friday, Saturday, Sunday, and Monday are cleared for this. Reach out and we will work through your situation with you.
All formal communication will be conducted over a Microsoft Teams video link originating from Basilic. This is deliberate. It confirms identity on both sides and it means that any message claiming to be from us that routes you somewhere else should be treated as suspect. We will not discuss custody details over channels we did not originate.
We will never ask you for your seed words, in any format, for any reason.
THIS SITUATION IS STILL DEVELOPING
Analysis is ongoing, and the guidance has already shifted once in the first twenty-four hours. Coinkite has said a formal technical review is coming. Block has published preliminary findings and noted that some conclusions await hardware validation. Assessments of which devices are affected, and how severely, may change again.
Check the primary sources directly rather than relying on any single summary, including this page. We will update this post as material information becomes available.
SOURCES
- Coinkite, Technical Deep Dive into the Entropy Issue, July 30, 2026
- Coinkite, Mk3 Security Advisory, July 30, 2026
- Block Bitcoin Engineering and Security, Predictable RNG Fallback and 32-Bit Reseed in COLDCARD Firmware, July 30, 2026
- NVK (Coinkite), statement on X
- Rob Hamilton (AnchorWatch), preliminary on-chain analysis of the sweep, July 30, 2026
- COLDCARD firmware downloads and passphrase documentation
Basilic Financial is a Colorado state-registered investment adviser and a fiduciary. This post is educational and does not constitute personalized investment or custody advice. Custody decisions depend on individual circumstances, and readers should consult the primary sources above and seek guidance appropriate to their situation before acting.
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