Coldcard Hack Highlights Security Flaws in Trust Models

Coldcard Hack Highlights Security Flaws in Trust Models

The recent Coldcard hack has resulted in nearly $114 million in bitcoin being drained from over 709 addresses. Attackers exploited a firmware flaw that generated wallet seeds with less randomness than promised. The exploit unfolded quickly, with the first sweep emptying around 500 wallets in just 25 minutes.

This significant security lapse stems from a bug introduced into Coldcard’s codebase in March 2021, which remained undetected in the open-source project for more than five years. Despite being publicly available for inspection, the flaw went unnoticed, raising questions about the reliability of community oversight.

The Nature of Open-Source and Its Limitations

Coldcard’s source code was open for public scrutiny, but the fundamental principle of “don’t trust, verify” faltered due to a lack of qualified reviewers actively examining it during this period. The timeline of events is crucial. Coldcard initially operated under a GPL license until November 2020 when a transition to a new license with the Commons Clause occurred. This shift effectively made their software no longer open source.

Shortly after the switch, the code underwent significant revisions that ultimately led to the bug that compromised wallet security. This rewriting, motivated in part to restrict competitors, coincided with crucial changes in Coldcard’s seed generation algorithm.

Failures in Community Oversight

Researchers had previously flagged issues in Coldcard’s software – like a multisig verification flaw in August 2020. While these concerns were acknowledged, the negative response from key figures in the Coldcard community may have discouraged further scrutiny. Criticisms directed towards those who brought attention to vulnerabilities foster a climate where researchers hesitate to disclose potential flaws due to fears of backlash or ridicule.

The BTC Sessions host, Ben Perrin, recently reflected on this dynamic, admitting that his confidence in the brand’s capabilities may have led him to overlook problematic behaviors.

A Call for Rigorous Verification

The aftermath of the Coldcard exploit emphasizes the need for the entire crypto community to prioritize user security. It’s crucial to disseminate migration guidance and make clear that updates cannot rectify previous vulnerabilities. Furthermore, a reevaluation of past recommendations and endorsements is necessary to ensure they are grounded in verified information rather than repetitive claims.

Going forward, Bitcoin media must return to a more adversarial posture, scrutinizing all claims regardless of the source’s reputation. The ethos of Bitcoin was established on the principle that trust should not underpin security. Moving ahead, the community must apply this principle uniformly across all stakeholders, including established voices.

Do not trust the vendor. Do not trust the vendor’s critics. Verify.