Bitcoin Magazine: Coinkite’s Coldcard Bug Exposed Single-Sig Risk. Multi-Vendor Multisig Is the New Bitcoin Custody Baseline

In the wake of Coldcard’s catastrophic entropy bug, self-custody advocates and experts have begun recommending a new standard: multi-vendor multisignature wallets. The approach is designed to reduce dependence on any single hardware wallet manufacturer, among other risks.

The Coldcard entropy bug, which went undiscovered since at least 2021, has delivered a stark lesson to Bitcoin self-custody advocates and users. No matter how legitimate, competent, recommended, or reputable a wallet provider may appear, a major bug is still possible. As a result, Bitcoin users are reexamining old assumptions, including the widely discussed “death of single sig,” the practice of trusting one wallet alone to generate a private key pair.

The Threat Model

Self-custody is, by any measure, an advanced practice in Bitcoin. Advocates recommend it as a way to protect user funds from exchange malfeasance, such as the failures seen in the cases of FTX and MtGox, among many others. But recent events have prompted a reevaluation of custody practices, with many bitcoin owners moving coins to exchanges, at least temporarily, while others are upgrading or changing their self-custody setups.

Nick Neuman, CEO of Casa, claimed that 233,000 bitcoins moved to safety in reaction to the Coldcard hack.

To understand when self-custody makes sense, and for whom, it is essential to understand a personal threat model. A threat model is a careful analysis of threats to an individual, used to design security practices and structures in advance. In practice, that framing is what turns the Coldcard episode from a single-product failure into a broader reminder that custody choices depend on which risks a user is actually trying to reduce.

A simple way to approach threat modeling is to step back and list all the things that worry you about self-custody. Then add to that list the risks that advocates commonly warn users about. Next, sort or rate those items according to which are most likely to happen to you and which are most likely to happen in general. Finally, rank each item by how catastrophic it would be if it occurred; can your current setup and plans survive that threat?

Two of the most likely causes of loss of funds in Bitcoin self-custody are user error related to backups or forgotten passwords, and theft. Many of the wallets believed to contain lost bitcoins that have not moved stem from bad private-key backups in the early days, which resulted in data loss after a computer failed. Others used passwords that were too difficult to brute force and then forgot them, permanently encrypting their private keys.

On the theft side, bad entropy attacks likely rank among the most successful attacks on self-custody to date. Coldcard joins a significant list of wallets that have suffered similar bugs, whether intentional or otherwise, including Trust Wallet and many lesser-known, possibly malicious mobile wallets. In some cases, fake wallets such as the iOS Sparrow Wallets simply stole user funds by keeping a copy of user-generated private keys and sweeping the funds once they were deposited. In all of these examples, more thoughtful behavior before trusting random software with your life savings is the solution.

Once users have a clear threat model and a good enough understanding of the technology, designing security practices becomes more science than art. While every individual has specific circumstances to consider, some structures have emerged as especially resilient against most threats. One such practice, increasingly recommended and adopted among long-term self-custody Bitcoin holders, is a carefully formed multisig setup.

Multi-Vendor Multisig

The term “Multi-vendor Multisig” is relatively new in the self-custody niche. The term “multisig” has nonetheless gone viral in 2026, apparently triggered by the Coldcard hack that saw the loss of more than $100 million worth of bitcoin, mostly from single-seed wallets. Most single-seed Coldcard users appear to have generated their private keys on the device without adding an extra passphrase, which adds custom entropy to the private keys, or extra dice rolls, which do the same in a different format.

Weak entropy from the Coldcard firmware — which users had no reason to distrust, given the company’s strong brand — made guessing the related private keys feasible with some custom work, which hackers eventually figured out.

The resulting viral interest in multisig is warranted. Multisig Bitcoin wallets protect users from hardware manufacturer errors by letting them construct a Bitcoin address that requires signatures from multiple private keys and therefore multiple devices, in what is known as a Bitcoin script. Bitcoin scripts are contracts of sorts that set the spending conditions for a bitcoin wallet. All Bitcoin wallets can be thought of as involving some kind of script, with the simplest and most popular being one in which anyone who can sign a valid transaction can spend all or any of the funds.

Multisig scripts, by contrast, require a threshold of valid signatures from different keypairs to authorize a withdrawal. These scripts are enforced by the Bitcoin consensus rules.

Multi-vendor multisig theory holds that users should make sure every keypair used to construct a Bitcoin multisig is generated from a different wallet vendor. One example that is likely popular today would be a Trezor Safe 7 hardware wallet with one key, a second key generated by a Ledger Nano, and a third key generated by a multisig wallet provider and treated as a recovery key. A script of this sort would require any two valid signatures out of the three possible signatures in the setup.

By using two different hardware wallet providers, the user minimizes trust in any single wallet vendor and protects against an entropy failure like the one seen in Coldcard.

Other multisig setups can add more keys, with a 3-of-5 threshold also being common and a standard offering of a multisig-specialized wallet like Casa. At this point, the terminology commonly used to describe Bitcoin spending software starts to break down and merits clarification. Wallets like Casa are software interfaces that let users combine partially signed transactions from different private key pairs. In this scenario, it becomes more useful to describe hardware wallets like Trezor or Ledger as “key signers,” since no single keypair in the set holds enough key material to spend all the bitcoin held in the multisig script address.

So Casa is a multisig wallet that lets users use a threshold of hardware signers to secure and send bitcoin funds. Fundamentally, these tools help users interact with Bitcoin script and create consensus-valid transactions more easily. Other examples of such multisig wallet providers include Nunchuck, Sparrow desktop wallet and Unchained Capital.

In cases like Casa and Unchained, the wallet provider offers users a recovery key controlled by the company, which some users find useful. Nunchuck and Sparrow, on the other hand, are designed for full user autonomy in this regard, though Nunchuck does offer a premium recovery key-related plan as well.

The Upsides of Multi-Vendor Multisig

Another benefit of a multisig wallet is its potential resistance to the infamous wrench attacks. Countries like France, which make Bitcoin and crypto ownership a matter of public record as a consequence of tax filings, have become focal points for crypto-theft-related kidnapping.

Whether using self-custody or not, targets of this kind of crime are vulnerable to theft, particularly when funds can be moved in full quickly, whether from a custodial exchange accessible from a phone or from a self-custody setup.

Advanced forms of multisig, such as multi-jurisdictional or time-locked multisig, can require users to travel, ideally through an airport, in order to reach other key signers needed to construct a valid bitcoin transaction. Alternatively, a recovery key in the multisig can be configured so that it will not sign for two weeks after the user submits the request and corresponding transaction data.

The result is the removal of the final central point of failure in Bitcoin custody: the user’s own willingness to send the bitcoin, particularly under duress. While best practices for wrench attacks generally try to avoid reaching that situation in the first place, making it difficult to spend coins also protects users from a wide range of attacks, including phishing schemes and other forms of social engineering that use pressure tactics to fool users into sending funds quickly.

Multisig has also begun to enable new forms of Bitcoin insurance, as demonstrated by AnchorWatch, a multisig wallet and insurance company that offers bitcoin theft protection denominated in BTC. The company’s services today are primarily offered to Americans through the Lloyd’s of London insurer.

The Downsides of Multisig

One critical downside of multisig is that the user does not only need access to the threshold key material needed to sign, whether that is two hardware wallets, or one hardware wallet and a recovery key from the wallet company. The user also needs to store a copy of the multisig script or template so they can recreate the smart contract and the valid withdrawal conditions for spending.

Most multisig wallets store this information for clients, but they also send a copy to users so they can recover independently of the multisig wallet if it ever goes offline.

This post Coinkite’s Coldcard Bug Exposed Single-Sig Risk. Multi-Vendor Multisig Is the New Bitcoin Custody Baseline first appeared on Bitcoin Magazine and is written by Juan Galt.