Coinkite has issued a security advisory urging all users who generated a seed phrase on a Coldcard Mk3 running firmware versions 4.0.1 through 5.0.3 to consider their wallets potentially compromised and to migrate their bitcoin immediately. Coldcard is one of the most widely used Bitcoin-only hardware wallets, marketed specifically to users who prioritize sovereign self-custody, making a seed-generation defect at the firmware level especially significant. The warning comes after Block's Bitcoin engineering and security teams uncovered deficient seed-generation behavior while investigating reports of wallets being drained remotely.

The advisory specifically covers Mk3 firmware released from March 2021 onward, meaning affected devices may have been in service for years before the vulnerability was identified. According to Coinkite's initial analysis, Mk4, Q, and Mk5 devices are not affected by the vulnerability. However, Block researchers described two separate weaknesses affecting different Coldcard generations at varying levels of severity. Block confirmed that no Bitkey or other Block products are impacted.

Developers Reproduce Predictable Mk3 Seed Generation

Bitcoin Core developer Gregory Sanders, known online as instagibbs, successfully reproduced the Mk3 weakness on a newly initialized device using only the number of keypad presses made during setup. The ability to reconstruct a seed from such limited inputs indicates the entropy source was far below the mathematical threshold required for secure BIP-39 key generation, where randomness is the sole barrier preventing an attacker from deriving a user's private keys. He advised that Mk2 and Mk3 users should treat the exposure as urgent, while noting that the Mk4's status had not been confirmed through his testing.

Developer Antoine Poinsot identified a key hardware distinction: Mk4 seed generation leverages the microcontroller's true random number generator, whereas Mk3 firmware did not utilize that source in the same manner. Coinkite's March 2021 release notes for version 4.0.0 confirm that all cryptographic and BIP-39 code was replaced with new implementations. Foundation Devices CEO Zach Herbert traced the apparent entropy defect to that same 120-file rewrite, while emphasizing that no evidence links the error to the accompanying licensing change.

Block Traces Potential Drain Scope to 1,083 BTC

The first identified sweep moved 594.48 BTC from 500 single-signature addresses across Bitcoin blocks 960188 to 960191. Atlas21 counted 1,324 spent UTXOs and determined that 562 BTC was consolidated into another address before the sequence concluded.

Block engineer Clay Garrett subsequently flagged 695 earlier transactions carrying the identical full fingerprint as the known set. Those transfers moved an additional 488.10957948 BTC, raising the potential combined scope to 1,082.58680432 BTC if both groups belong to the same operation. At the time of reporting, the total was valued at approximately $69.6 million, with bitcoin trading near $64,247.

Coinkite has not confirmed that the firmware weakness is responsible for every transaction in either set. Block's team stated that the attack was likely still ongoing, and the broader transaction group remains under verification.

Affected Seeds Must Be Replaced, Not Reimported

Transferring an affected recovery phrase into another hardware or software wallet does not resolve the issue, because the underlying seed itself remains predictable. This distinguishes the vulnerability from threats that exploit how users store or handle seed phrases, such as SparkKitty malware scanning phone images for recovery phrases or BlueNoroff campaigns profiling wallets through fake meeting calls. In those cases, the seed was generated correctly; here, the seed was never cryptographically sound to begin with.

Coinkite recommends the following migration procedure: generate a fresh seed on an unaffected device, record and verify the backup, check a receive address, send a small test transaction, and only then transfer the remaining balance. Users who cannot migrate immediately can create a strong, unique BIP-39 passphrase as an interim protective measure. Advanced users may alternatively generate a dice-only seed on an empty Mk3 running firmware 4.1.9 using at least 99 independent rolls.