Bitcoin hardware wallet maker destroys some inventory after more than $88 million stolen

Coldcard's five-year old seed-generation flaw has highlighted a significant gap in hardware wallet testing procedures, as revealed by Kraken's chief security officer, Nick Percoco. The incident has exposed a broader weakness in how these devices are independently tested, according to Percoco, who argues that it should serve as a "wake-up call" for hardware-wallet makers.

The flaw, which resulted in the generation of predictable random numbers, affected over 4,500 addresses and drained nearly $90 million in Bitcoin. During the firmware migration process, Coldcard inadvertently integrated a predictable random number generator (PRNG) instead of the intended true random number generator (TRNG), leading to the vulnerability.

Code reviews confirmed the existence and functionality of the TRNG code, but there was no check to ensure this was the RNG actually being called during production. Percoco emphasized that hardware wallets have no equivalent process for independent verification of the entropy source used in production firmware. Such checks are already standard in the security industry, referencing NIST SP 800-90B and BSI AIS-31 standards.

Ledger has disclosed that its TRNG is evaluated under AIS-31 and holds PTG.2 certification, while its devices also hold ANSSI's CSPN Certification. Coldcard has halted all device shipments and destroyed remaining units containing the affected firmware, though Coinkite advises users not to dispose of their affected devices as they may still be essential for fund recovery.