Last Thursday night, about $38 million in Bitcoin disappeared from around 500 wallets. The whole thing took 25 minutes.
$38M
in Bitcoin
~500
wallets
25 min
the whole thing
Nobody got phished. No exchange was hacked. Nobody left their password lying around.
The thief simply figured out the keys.
How is that possible?
Every crypto wallet starts with one random number. That number becomes your key. Your key controls your money.
The number is supposed to be so random that guessing it is impossible. There are more possible combinations than there are atoms in the universe. You could guess forever and never land on the right one.
But “random” depends on the machine that made it. If that machine has a bug and isn’t picking from the full range, if it’s really only choosing from a few million options instead of an unimaginable number, then guessing suddenly becomes easy. A laptop could do it in an afternoon.
The scary part
And here’s the scary part: you would never know. A wallet made with a bad random number looks completely normal. Same words. Same address. Works perfectly. Until one day it doesn’t.
That’s what appears to have happened here. Someone found the bug, worked out the keys, and emptied every wallet at once.
The device involved
Device: Coldcard Mk3 · Software: from 2021 onward · Warning issued: July 30th
Newer models aren’t affected.
The wallets seem to trace back to one model of hardware wallet, the Coldcard Mk3, and one range of its software, from 2021 onward. The company, Coinkite, put out a warning on July 30th telling those users to move their money. Newer models aren’t affected. They haven’t confirmed the bug caused the theft, but the dates line up uncomfortably well.
To be fair to them: they warned people fast, said exactly which versions were affected, and told users what to do. A lot of companies would have gone quiet.
And this isn’t an argument against hardware wallets. The device kept the key offline like it was supposed to. The problem happened before that, at the very first step, when the number was created.
The lesson
Almost everyone protecting crypto today depends on one key, made by one device, on one day.
Everything else you do, the safe, the steel backup plate, the offline storage, protects that key after it exists. Nothing protects the moment it was made.
You can’t check it. There’s no test that tells you whether your key came from a good random number or a bad one. You find out when your money leaves.
What fixes it
Anything that stops one device from being the only thing that matters.
Adding a passphrase helps. It’s a secret the device didn’t create, and passphrase users seem to have survived this untouched. Multi-signature helps too, because a thief would need to break several keys instead of one.
Launching soon
Coinmama Wallet, launching soon, is built on an enterprise grade MPC solution, which does the same thing at the very beginning. Instead of one device creating the key, several devices each contribute a piece. The complete key is never assembled in one place at all.
So if one device’s randomness is broken, the thief still gets nothing. They’d need every device to be broken at the same time, on different machines, different software, different places.
Is MPC perfect? Any software can have bugs, and MPC is based on software, but it removes this specific failure: one bad device quietly ruining everything.
If you own crypto, do this today
Used a Coldcard Mk3? Move your money to a wallet made on a different device. Test with a small amount first. Keep your old backup until you’re sure.
Got one key, one device, no passphrase? That’s the exact position those 500 people were in. Worth thinking about this week.
Got a passphrase? Guard it. Never type it into a website. It may be the only reason you’re reading this instead of living it.
We build MPC wallets, so of course we have a view here. But add a passphrase, roll dice, use multisig, we don’t mind which. Just don’t leave it all resting on one number you can’t check.
