A seed phrase that seems random can be precisely cracked?

The reason why Cold Wallets have long been regarded in the cryptocurrency market as the last line of defense for asset protection is that the process of generating their private keys and seed phrases has absolute unpredictability in true random terms.

However, just when everyone believed that cold wallets were safe, a major security crisis erupted in the famous Bitcoin cold wallet brand Coldcard, exposing a harsh reality to the entire network: as long as a security error occurs in the process, the cold wallet can still be cracked.

Cold wallets replace protection with software

According to subsequent cybersecurity technical analysis reports, the root cause of this tragedy can be traced back to a firmware version v4.0.0 released on March 1, 2021.

At the time, there was an engineering oversight: when the device executed the most crucial process of creating the mnemonic phrase, it directly skipped the hardware random number generator that the hardware was originally designed to use to produce real entropy values—causing the mnemonic phrase to lose its unpredictability.

Chip serial number and time difference exposure

In general, it’s virtually impossible to guess a Bitcoin cold wallet’s 24-word mnemonic by brute force in terms of mathematical probability.

However, the software workaround used by Coldcard in that firmware version forced the attackers to write bespoke high-performance algorithms, and by pairing them with a GPU’s computational power matrix to perform comparative calculations offline, they could accurately reconstruct the mnemonic words from that time within minutes, or even seconds.

All five years of single-signature private keys exposed

What shocked the community most is that this code vulnerability didn’t merely affect a specific batch or a single hardware model—it was embedded in the software architecture layer for as long as five years.

This means that regardless of whether a user bought an Mk3, Mk4, Mk5, or the latest flagship Coldcard Q, when they clicked to create a new wallet on the device, they already handed the private-key cracking rules over to someone else.

The whale-heist wave brought by automated scripts

Once the underlying logic of the vulnerability was breached, a wave of unprecedented cold-wallet cracking and liquidation sales arrived on-chain in the near term. Hackers used highly automated software tools to complete a chain of liquidations.

This raid targeting assets in cold wallets shattered the traditional belief in the market that prolonged inactivity equals absolute safety. Many whale wallets that had been dormant for years were instantaneously emptied without warning.

Minute-level precision strike

On the day the attack launched, the hacker deeply integrated the massive database of computed private keys with automated monitoring and transaction scripts, planting what can only be described as a nuclear-bomb-level time bomb before anyone even knew what had happened.

When the attack instructions were officially triggered, the script continuously initiated and confirmed hundreds of on-chain transfers within just 25 minutes, instantly consolidating the 594 bitcoins dispersed across nearly 500 Coldcard addresses into money-laundering addresses controlled by the hacker.

Image source: X

Dormant whales became the biggest victims

On-chain data analysis shows that in this wave of looting, the primary victims were not investors who trade frequently, but rather the most patient Bitcoin whales—those who had held for the longest time.

Among the addresses that were cleared, an extremely high proportion had been asleep on-chain for more than three years with absolutely no movement records. Out of extreme trust in Coldcard’s hardware security, these users carefully stored the devices offline after completing the setup in 2021.

Multi-signature mechanisms demonstrate extreme protection

In this brutal on-chain disaster, only one type of Coldcard user was able to escape almost unscathed: those who stored assets using a multi-signature architecture.

Because the withdrawal authority of a multi-signature wallet is distributed across multiple independent private keys, even if the hacker successfully derived the private key of one Coldcard through a firmware vulnerability, without authorization from other independent keys, they still cannot unilaterally sign and execute a transfer transaction.

Industry reflection and user response strategies

It’s hard to imagine any user wanting to see a Coldcard incident happen. However, all we can do now is reflect on how to better protect our assets in the future.

This crisis revealed that even hardware wallet brands with an excellent reputation in the market and that market themselves as high-spec security may still suffer fatal flaws due to human oversight during the software compilation process.

Transfer funds immediately and change the mnemonic phrase

Any user who, after updating the firmware in March 2021, created or reset a single-signature mnemonic on the affected devices must understand that the private keys associated with that address carry an extremely high risk of being reverse-computed by hackers at any time.

Whether it’s a Coldcard or any other Web3 cold/warm wallet: if a dangerous event occurs that could leak the mnemonic phrase, it’s recommended to immediately switch to a different wallet—so that one day when large assets move in or out, they won’t mysteriously be stolen by hackers.

Architecture shifts from single-signature to multi-signature

The Coldcard incident strongly confirms how “glass-like” single signatures are when facing systematic code vulnerabilities. In the future, to prevent assets from being extracted by a single node, users are advised to move toward multi-signature architectures.

Further defense thinking involves dispersing hardware supply-chain risks. When building a multi-signature wallet, you should not rely entirely on devices from a single brand. That way, even if Coldcard, Trezor, or Ledger has an issue, it will be difficult to directly transfer the wallet’s assets.

The dilemma between open-source and auditing

From the perspective of industry development, the Coldcard vulnerability incident also sparked reflection on the balance between open-source code and security audits. Many users in the past blindly trusted open-source software, believing that as long as the code is公開 (publicly available), it is equivalent to absolute safety.

The reality is that massive and complex codebases often lack sufficient third-party professional teams to conduct long-term, real-time, and comprehensive deep reviews—leading to fatal oversights buried in the build process for years without being detected.