Coldcard PRNG Flaw Leads to $86M in Bitcoin Losses Over Five Years

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A flaw in Coldcard hardware wallet firmware since March 2021 led to the confirmed loss of 1,367 BTC ($86M) across 4,585 addresses, according to Galaxy Research. The issue stemmed from a misconfigured PRNG in the libngu library, allowing attackers to exploit weak entropy in seed generation. Multiple waves of Bitcoin analysis revealed the thefts, which occurred over five years. The incident adds to growing concerns about entropy in key generation, a recurring problem in crypto security. Traders are advised to monitor altcoins to watch for potential risks and opportunities.

The latest Bitcoin hack happened when a pseudo-random number generator (PRNG) vulnerability embedded in Coldcard hardware wallet firmware since March 2021 has resulted in the confirmed loss of 1,367 BTC, roughly $86M, across 4,585 addresses, according to on-chain mapping published by Galaxy Research as of August 2, 2026.

The incident is the worst hardware wallet hack in Bitcoin history by confirmed losses, and it required no phishing, no physical device access, and no user error. This is not simply a Coldcard product failure.

It is a structural demonstration that the security guarantee of any self-custody arrangement, hardware or software, rests entirely on the entropy quality of its seed generation, and that a single misconfigured preprocessor macro can silently collapse that guarantee for years without triggering any observable alarm.

This latest Bitcoin hack came as BTC USD trades -1.4% down on the day, sitting at $62,250 following a volatile seven days that have seen it fall from over $65,000. 24-hour trading volume sits at $16.9Bn, down from over $20Bn yesterday.

(SOURCE: TradingView)

Bitcoin Hack Mechanics: How a Misconfigured Macro Broke Five Years of Seed Generation

The root cause of the issue identified by Block’s engineering team lies in Coldcard’s libngu library. Coinkite configured the board to zero to disable MicroPython’s RNG, intending to use its hardware true random number generator (TRNG). However, the libngu guard only checked if the macro was defined, allowing zero to pass the check.

As a result, MicroPython compiled out the STM32 hardware RNG call and relied on Yasmarang, a software PRNG with only about 40 bits of effective entropy instead of the expected 128 bits for a BIP-39 seed phrase.

While later models (Mk4, Mk5, Q) improved to an estimated 72 bits of effective entropy, this still falls short of the ideal. The disparity between 40 bits and 128 bits is significant, making it easier for attackers to target weak seeds.

On July 30, 2026, Coinkite issued a security notice just hours before an attack that drained approximately 594 BTC from 500 addresses. Two additional waves were tracked, totaling 1,367.05 BTC across 4,585 addresses by August 2. Most of the stolen Bitcoin remains unspent, suggesting the attacker is biding their time before moving the funds.

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Crypto Security Context: A Recurring Entropy Failure Pattern

The Coldcard incident fits a documented pattern. Android’s SecureRandom flaw in 2013 repeated nonces across ECDSA signatures, exposing keys across multiple Bitcoin wallets. The Profanity vanity address generator used in the Wintermute hack of 2022 seeded key generation with 32 bits of entropy, enabling an attacker to drain $160 million.

The Milk Sad disclosure in 2023 found that bx seed in Libbitcoin Explorer used a Mersenne Twister seeded by system time, collapsing 256 bits of expected entropy to roughly 32 and exposing more than 120,000 wallets. Different codebases, different chains, the same structural failure: a randomness source assumed to be strong was not.

Ari Redbord, global head of policy at TRM Labs, characterized the incident as evidence that self-custody transfers risk rather than eliminates it, a framing consistent with TRM Labs’ H1 2026 data showing that infrastructure and key compromises, while representing only 15 percent of incidents, accounted for 76 percent of total dollar losses across a record 207 hack events.

Galaxy said it has reported roughly 600 suspected attacker-controlled addresses to federal investigators, compliance vendors, and cybersecurity firms, while cautioning that its Coldcard attribution rests on on-chain heuristics rather than per-address computational seed reconstruction.

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The post $86M in Bitcoin Lost to Coldcard’s Silent PRNG Flaw Over Five Years appeared first on Coinspeaker.

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