Coldcard, a popular bitcoin-only hardware wallet, has fallen victim to a data breach resulting in hackers siphoning over $100 million US worth of bitcoin from users’ wallets. The breach, revealed by blockchain intelligence firm Galaxy Research, has raised concerns about the security of cryptocurrency holdings.
Coldcard, developed by Coinkite in Toronto, functions as a hardware wallet that does not store bitcoin but enhances security by storing “seed phrases” offline within the physical device. These seed phrases serve as a master key for the bitcoin-only wallet, allowing users to authorize and sign transactions securely.
The recent hack exposed a software flaw in Coldcard that enabled hackers to reconstruct wallet seed phrases remotely, leading to multiple waves of attacks. As a result, approximately 1,596 bitcoin from around 7,300 addresses have been stolen, with a potential total loss of 2,055 bitcoin valued at about $130 million US if a suspected fourth wave is confirmed.
Coinkite has issued firmware updates to address the vulnerability and advised affected users to transfer their funds immediately. The company acknowledged the flaw’s origin in March 2021 due to the misuse of a pseudo-random number generator instead of the intended hardware-backed true random number generator.
Furthermore, Galaxy Research highlighted that while 90% of the stolen bitcoin remains stagnant in the wallets, precautions should be taken as the funds could eventually be moved. The ongoing investigation has involved sharing details with US law enforcement agencies, cryptocurrency exchanges, and cyber-investigation groups to track down the attackers and prevent further incidents.
To safeguard their holdings, Coldcard users are urged to install the latest firmware, especially for wallets created post-update, and replace seed phrases generated on vulnerable devices. Coinkite reassured customers that a technical review is in progress, emphasizing the importance of prompt action to mitigate the impact of the breach.
Overall, the breach underscores the importance of proactive security measures in the cryptocurrency space. Users are advised to stay vigilant, consider migrating funds to secure addresses, and await further guidance to safeguard their digital assets effectively.