Was AI Responsible for Finding the Coldcard Security Flaw?

A five-year-old Coldcard software flaw may have allowed an attacker to reconstruct private keys and sweep more than 1,100 bitcoin, prompting the wallet’s maker to blame the discovery partly on artificial intelligence (AI).

The incident became public after roughly 594 BTC, valued near $38 million at the time, moved from about 500 single-signature bitcoin addresses on July 30. Later blockchain reviews expanded the possible scale of the theft, with researchers estimating that between 1,082 and 1,196 addresses may have been affected during a period of about 41 minutes. A custom dashboard called Coldcard Sweep Watch placed the total at 1,128.4717 BTC, worth about $71.1 million when bitcoin traded near $63,044. The affected addresses were linked by one common detail: Their recovery seeds had been created on Coldcard hardware wallets manufactured by Canadian company Coinkite.

A recovery seed is a list of words that controls access to a cryptocurrency wallet. Anyone who can reconstruct or obtain that seed can usually move the wallet’s funds without possessing the physical device. The flaw involved the process used to generate random data. Secure wallets depend on high-quality randomness so that their recovery seeds cannot be guessed. On the most seriously affected Mk3 devices, researchers estimated that the seed may have contained only about 40 bits of effective randomness instead of the intended 128 bits. Some newer devices may have provided approximately 72 bits of effective randomness, still much weaker than intended.

The problem began with a build-time configuration mistake involving two software functions that performed similar jobs. One function used the device’s hardware-based true random number generator, while the other relied on a weaker software process inherited from MicroPython. Coinkite intended to disable the MicroPython option, but a software check looked only at whether a configuration label had been defined, rather than whether its value had been set to zero. As a result, the finished firmware could silently select the weaker function. The mistake entered the code around a 2021 software migration and remained in publicly available firmware for more than five years.

Coinkite issued an urgent advisory warning that certain seeds generated on Coldcard devices could be weak. Mk3 devices running firmware version 4.0.1, released around March 2021, and later versions were among those facing the greatest risk. Users who added at least 50 independent dice rolls while creating their seed may have supplied enough extra randomness to avoid the weakness. A strong BIP-39 passphrase could also have made reconstruction more difficult.

Coinkite CEO Rodolfo Novak apologized publicly and said the company took full responsibility for the firmware failure. He said the team was working on fixed software, technical reports, and support for affected users. Coinkite also advanced a striking theory about how the flaw was discovered. Because its firmware had been publicly available for years, the company said it believed someone may have used AI to examine older versions of the code and locate the weak randomness path. “To every other developer: we believe this is a sober reality of the new AI paradigm. AI-assisted code review can now find latent bugs at a speed that is outpacing even the industry’s most seasoned experts,” Novak wrote in his apology post published on X. Independent researchers later reported using AI models to locate or explain the issue after the underlying randomness problem was known, but that did not establish that the original attacker used AI.

Some security specialists argue that focusing too heavily on AI risks distracting from a basic engineering failure. Many believe the configuration mistake was a known type of software error, and conventional code reviews, testing procedures, or audits centered on seed generation could have detected it years earlier. The incident also challenges assumptions about open-source security. For Coldcard users, the immediate priority is determining when and how their seed was created. Anyone with an affected seed must verify instructions through official Coinkite channels, install corrected firmware, create a new seed, and move funds carefully while watching for phishing attempts and fake support messages.

Source: https://news.bitcoin.com/featured/was-ai-responsible-for-finding-the-coldcard-security-flaw/