1/ During our investigation of the Coldcard drain yesterday, we identified an unusual pattern in the sweeps. That pattern led us to a hypothesis that has since been confirmed: the operator used a paid account at a well-known blockchain-services provider to query the source addresses and perform other related activity during the sweeps.

🚨 COLDCARD SECURITY UPDATE [Jul 31, 9:40 EDT] Mk3 4.2.0 is now available. Affected seeds without ≥50 fair, independent, private dice rolls: 👉 Mk3 4.0.1–4.1.9 👉 Mk4/Mk5 <5.6.0 👉 Q <1.5.0Q Update first. Generate a new seed. Migrate carefully.

The first post was the advisory and what users should do. This second post has the technical details: what actually went wrong, why our reviews missed it, the impact across Mk3/Mk4/Q/Mk5, and what we changed. ( current evaluating Mk3 firmware release )

1/ Earlier today, our Bitcoin engineering and security teams at Block began investigating reports of non-Bitkey wallets being drained. To proactively protect our customers, we began investigating immediately. Here’s what we found 🧵

Regarding the Coldcard entropy bug – many folks are explaining what happened but I wanted to take a minute to explain why it may have happened. It's a disastrous situation and our heart goes out to all the Bitcoiners affected. Here's a timeline of events: On July 28 2020: @FoundationHQ announced our first Passport hardware wallet and noted that we were building on Coldcard firmware which at the time was GPLv3 licensed (FOSS license). On July 30 2020: NVK publicly said he regretted choosing GPL because Coldcard now had a “clone” and that they would change things in future updates. On November 18 2020: Coldcard added its MIT + Commons Clause license, prohibiting commercial products substantially derived from the software. On January 8, 2021: Coldcard firmware 3.2.1 formally announced, “License changed from GPL to MIT+CC on files for which the GPL doesn’t apply.” CC is the "Commons Clause" license addendum which is "source available" instead of FOSS. On March 1, 2021: The “First pass w/ libNgU” commit removed the GPL @Trezor-derived crypto libraries and replaced them with libNgU. That same 120-file commit changed seed generation code. libNgU was licensed with a novel “Licensed for Bitcoin Only” license. On March 17, 2021: Version 4.0.0 announced that all crypto and BIP39 code had been replaced and that the “last remaining GPL code” was removed. Our best understanding right now is that the entropy bug was collateral damage from this major overhaul of the codebase. To be clear, this overhaul was not solely about licensing. Coldcard also cited technical goals including adopting Bitcoin Core’s libsecp256k1, faster AES and SHA implementations, and reproducible builds. But the timeline establishes two things: (1) Foundation’s launch was the obvious impetus for Coldcard’s licensing change, and (2) removing the remaining GPL code was an explicit goal of the subsequent v4 rewrite. We don't know by how much the licensing pressure affected the scope or timeline of the rewrite. All we can determine is that the entropy bug was introduced inside the same 120-file commit that removed the old GPL code dependencies.