Coldcard seed-generation flaw puts nearly $90M in bitcoin at risk

Coldcard hardware wallets generated some recovery seeds using MicroPython's Yasmarang software pseudo-random number generator rather than the device's hardware entropy source, collapsing effective entropy on certain models to about 40 bits. The issue shipped in March 2021 and remained in publicly readable firmware for more than five years. Galaxy Research identified 4,585 affected addresses holding nearly $90 million after attackers swept roughly 500 of them. Coinkite said its current working assumption is that someone used AI to scan the publicly available firmware and uncover the bug. Why it matters: Weak seed generation can turn self-custody into a direct loss channel, because anyone who can recover the private key can immediately take control of the associated bitcoin. Market sentiment: Bearish; stress-on; tech-driven; fear. Drivers: Attackers swept funds across 4,585 addresses and nearly $90 million linked to a Coldcard seed-generation weakness, highlighting direct custody risk. Similar past cases: In 2023, the "Milk Sad" vulnerability affected Libbitcoin Explorer wallets created with the bx seed command after vulnerable versions relied on a weak Mersenne Twister PRNG for cryptographic key material. Attackers exploited the flaw to steal significant funds on 12 July 2023, and Libbitcoin Explorer 3.8.0 later removed the problematic entropy-generation command. The key distinction: Milk Sad involved a command-line wallet tool, while this incident centers on a hardware signer. Ripple effects: Weak entropy can propagate risk across any wallet workflow that treats a single device as the sole guarantor of seed safety. If users and vendors cannot clearly distinguish affected seeds from safe ones, custody trust may shift toward independently verifiable key generation. Additional swept addresses would likely strengthen demand for reproducible builds and smaller trusted cores. Opportunities and risks: Opportunities: Clear guidance from Coinkite or researchers on impacted devices and firmware could help users migrate funds to independently generated seeds and reduce exposure. Risks: If more addresses are swept or the affected keyspace remains searchable, reducing reliance on single-device seed generation becomes critical to limiting repeat compromise.