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PaperclipPerfector  1d ago (text post)   3535 thread views

Culture War Roundup for the week of August 3, 2026

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Grand Theft Crypto, Episode LXXVI

New week is here, time for new culture war happening is here. Maybe it belongs to finance thread, but both cryptocurrency and cryptocrime are now inseparable part of our culture.

Coldcard Hardware Wallet Flaw Linked to $70 Million Bitcoin Theft in 41 Minutes

An attacker drained 1,196 Bitcoin addresses in 41 minutes on July 30, taking 1,082.65 BTC worth about $70.2 million at the time.

Yes, safe crypto technology had proven to be unsafe once again. Follow the links in the article for more nerd details.

Why is this important? This time, this not due any fault or slip at the user side - their only mistake was trusting the professionals of Coinkite business operating since 2013 and considered one of the best by everyone in crypto.

Bitcoin is not to blame, Bitcoin worked as intended. The random numbers generated by Coldcard were not random.

Little parable for non nerds to grok what is it all about:

You have big pot of gold, and are very afraid you will lose it. Where to hide your treasure? You want to stay anonymous, you do not want anyone ever know that you are a rich man.

Fortunately, your bank provides deposit boxes, fully anonymous where anyone with key can come and withdraw the deposit, no questions asked.

Now, you have problem where to hide the key, so you do not lose or misplace it. No worry, you buy safe, made by trustworthy long established manufacturer that is 100% secure from crackers. You put your key inside, and feel relieved.

Until one day, you find the safe empty, the key vanished. You hurry to bank in panic, and your greatest fears come true. Someone was there, and emptied your deposit box. Your treasure is gone.

What happened? The super secure safe was unsafe. There was manufacturing fault that enabled anyone to open it if he knew about it. Some criminal mastermind learned about the vulnerability (For more mastermind points, he worked in the safe manufacturing company and put the fault there himself. For maximal mastermind points, he founded and operated the company himself, in a proper long con.) sneaked to your safe and squirreled away the key.

If your rage is pointed at bank, it is misplaced. Rightful target of your rage is the thief (good luck finding him, the chap can be now in Uruguay, Uganda or Uzbekistan, the world is big) and the safe company (good luck recovering anything from them). Just say farewell to your wealth and learn to love the hobo life.

Now, what are lessons of the episode?

1/ Another proof that crypto hadn't brought world peace and harmony as some more devoted fans promised, but crypto made crime cool again. Grisly, retarded and boring ordinary everyday crime stays, but evil genius was conjured from pages of pulp novels to reality.

2/ Trust no one. If you want to make you crypto stash really secure, you need to make your own random number generator, this means using the gold standard of physics, radioactive decay. No randomer random events can be found in this universe.

Too much work? Say good bye to crypto and invest in white powder. What you put in your nose, no one can take away from you ever again.

edit: links

Hardware wallets are constantly getting compromised, people should just use metamask. It's not 'secure' because you have a physical widget as opposed to a browser extension!

this means using the gold standard of physics, radioactive decay

Every day at work I battle the great and undefeated enemy: thermal noise. I recommend a thermal noise source.

As an embedded systems/electrical engineer, it's kind of astounding to me that a hardware wallet would rely on a software PRNG to generate cryptographic secrets in the first place.

  • Many embedded microcontrollers have hardware TRNGs built in.
  • If you don't trust that, most embedded microcontrollers have ADCs in them, which you can hook up to something noisy like a reverse-biased PN junction to generate entropy (or even just leave the thing connected to nothing and use the noise in the least significant bits)
  • If you don't trust that, there are many open source hardware TRNG designs available that you can strap into your device. I'm a big fan of this one.

There's really no valid reason I can think of to use a PRNG to generate cryptographic secrets.

Coldcard Hardware Wallet Flaw Linked to $70 Million Bitcoin Theft in 41 Minutes

An attacker drained 1,196 Bitcoin addresses in 41 minutes on July 30, taking 1,082.65 BTC worth about $70.2 million at the time.

AI slop, sadly. If someone would kindly provide some original human reporting, that would be great. I don't want to read some grifter's hallucination-riddled sloppification of the original source.

Edit: Original writeup by the security researchers who discovered the vuln: https://engineering.block.xyz/blog/predictable-rng-fallback-and-32-bit-reseed-in-coldcard-firmware

Sadly, also written by ai, but I would like to think there's a distinction between a sloppified primary source a slop grift article about it.

“ but both cryptocurrency and cryptocrime are now inseparable part of our culture.”

  • Let’s not overstate crypto. There are likely more people paying attention to the Pittsburgh Pirates in America than paying attention to crypto. This might be a little overstatement but it’s still fairly niche.

Using a passphrase ("13th word", or 19th or 25th etc) in addition to the shitty random number would have kept them safe, right?

The cryptocurrency is protected by a random number - it is a property of the crypto algorithm (not the wallet) that anyone who knows this number can steal it.

You can store the number en clair on a hardware wallet, so anyone with the wallet can spend the crypto (and someone who steals the wallet has stolen the crypto), or you can store the random number encrypted on the wallet (so you need the wallet and the key to spend the crypto). The passphrase is the key used to (symmetrically) encrypt the random number.

But if the underlying random number that goes into the crypto algorithm is not random and someone manages to guess it, then no amount of secrecy protecting your copy of the number will stop the guesser stealing your crypto.

You seem to have misunderstood what a passphrase is. The passphrase is not the PIN used on the hardware wallet to do transfers. The passphrase is an extra, optional part of the address key.

My technical expertise is limited for BTC, and non-existent for other cryptos - but wouldn't you need a separate passphrase for every key in the wallet to do that?

Best practice for BTC is to use each address and associated keys once only, which would make that impractical for a working wallet and pretty annoying for a cold storage wallet - you would need to memorise a new passphrase after each deposit or withdrawal.

Using a passphrase ("13th word", or 19th or 25th etc) in addition to the shitty random number would have kept them safe, right?

I don't know, but I was thinking of something similar. If (1) in addition to your lengthy crypto passkey consisting of a long random number, you also need to enter a simple one word password; and (2) you get only one try every 5 minutes, it seems like it would be far harder for people to steal your money.

It's a similar principle at work with ATM cards. A thief needs both the card itself and a simple 4 or 5 digit code. Neither of these is an insurmountable barrier, but combining them makes it exponentially harder to get into the person's bank account.

Anyway, I'm not an expert on computer security so I wouldn't be surprised if there were something important I were missing. But that's how it seems to me as a layman: That it's preferable to condition access to the account on two reasonably challenging obstacles as opposed to one obstacle which you believe to be super-duper challenging.

That's been possible for a long time. Choosing a pass phrase is optional when setting up these hardware wallets

But... Reportedly, even someone who had chosen a pass phrase for their buggy Coldcard got their account emptied. Hmm. Maybe the hackers ran some simple brute forcing on the accounts they couldn't get straight into?

That's been possible for a long time. Choosing a pass phrase is optional when setting up these hardware wallets

That's good to hear.

But... Reportedly, even someone who had chosen a pass phrase for their buggy Coldcard got their account emptied. Hmm. Maybe the hackers ran some simple brute forcing on the accounts they couldn't get straight into?

I have very little knowledge about computer security in general or this situation in particular, but it seems to me that the solution is to have a delay on password attempts. e.g. if you get your password wrong, you have to wait a minute to try again. After the second failed attempt, you have to wait 5 minutes. After that, 10 minutes. After that, an hour. It seems to me that this would make brute force attacks extremely time consuming.

Also, after a couple failed pass phrase attempts, the account holder could be texted and emailed so that he has an opportunity to lock down his account.

1/ Another proof that crypto hadn't brought world peace and harmony as some more devoted fans promised, but crypto made crime cool again.

I disagree with both extremes. Crypto is just a tool, one that can be used for good or evil depending on the people who interact with it. The first bank robbery probably happened 15 minutes after the first bank opened. The first bank also brought immense benefits to society. Crypto is no different.

2/ Trust no one. If you want to make you crypto stash really secure, you need to make your own random number generator, this means using the gold standard of physics, radioactive decay. No randomer random events can be found in this universe.

You still have to trust that you or the code you run didn't mishandle the numbers or cause them to lose entropy somewhere. You still have to trust something, on some level. Trusting nothing is impossible. However, I do agree with the principle that you should trust the least amount of things possible. Generating your own numbers (if done correctly) may be such a solution if you suspect the built-in RNG is dodgy.

And using radioactive decay is excessive and unnecessary. The real problem is that they rolled their own crypto.

I disagree with both extremes. Crypto is just a tool, one that can be used for good or evil depending on the people who interact with it. The first bank robbery probably happened 15 minutes after the first bank opened.

Not the same thing, bank robberies today tend to be rather primitive affairs, rarely successful (with rare exceptions).

And robbing bank from the inside requires decades of grind and hard work (and good connections) before you are promoted to position where you can squirrel away the dough.

Crypto crime is career open to anyone in the world with internet access, the ultimate meritocracy.

I fear that you may have sampling bias with regards to crypto. You don't hear about the failed crypto thefts, only the successful ones. Successful theft of crypto requires some degree of intelligence and hard work, much like successful theft from bank. Not just anybody with Internet access can do it.

(I should be clear that by successful, I am also including getting away with it without being caught or facing significant punishment. I will grant that crypto theft in certain respects is easier than, for example, breaking into a bank, but unless you have perfect ironclad opsec you can't just steal money and get away with it.)

Also laundering large sums of crypto is a gigantic pain in the ass compared to most other assets since it's all public on the blockchain. North Korea isn't bad at it since they've got a very long time horizon to slowly drip the money out through certain protocols, but if you're the average hacker on the block and you manage to grab 200M off an exploit you're going to struggle to get much of that into spending money.

And using radioactive decay is excessive and unnecessary.

There are very real concerns about even seemingly-good sources of hardware randomness. There remain reasons why Linux maintains CONFIG_RANDOM_TRUST_CPU: if your concern is nation-state level actors, you might not trust Intel's pinky swear that the random bits it generated have nothing up its sleeve (see DUAL_EC_DRBG for the sorts of concerns you'd want to be aware of).

Radioactive decay is at least something you can build relatively easily that has no obvious metaphorical sleeves to hide weaknesses. But you're probably right it's overkill for most users.

Genuine question - why can't they implement some kind of two factor authentication? So that using your analogy, there are two keys to your vault. Stealing one key is not enough. Wouldn't that make it exponentially more difficult to steal peoples' money?

Maybe it's not a good analogy, but getting into my bank account requires both a password and a code number which is sent to my mobile phone. Obviously this is not perfect security, but it seems like it makes things much harder to break in.

Or here is another question: Why can't crypto currency be stored in the equivalent of a "checking account" and a "savings account." Most of the money is in the "savings account," and money can be moved from the "savings account" only to the "checking account" with a 48 hour delay. So that the user can check his account every day and if he sees an unauthorized transfer, he can lock the account down before any of the money makes it to the outside world.

You can, it’s called a multi-sig wallet. It’s a pain but people do it.

Here is a linkedin-free writeup. Low entropy key generation is an oldie but a goodie -- I recall when ssh keys generated with Debian had this problem.

For this particular story, I think that the morale is that rather than worrying about increasingly far-fetched modes of attack ("yes, you can keep your key on an airgapped encrypted OpenBSD laptop, but what if someone steals that laptop and manages to brute force the passphrase, would you not prefer some hardware encryption where the chip clears itself after three wrong passphrase entries?"), you should worry about "what if my niche crypto implementation is not as secure as anticipated?"

Also, if you make hardware wallets, auditing that the crypto is implemented correctly seems to be (not to put too fine a point to it) THE ONE JOB YOU HAD? Most failing cryptography fails not because the math is unsound, nor because someone has a quantum computer with sufficient memory, but simply because implementations are hard and people write buggy code. I know enough about crypto to not try to roll out my own implementations. "Key generated from low entropy PRNG" is a failure mode we had before. I recall Truecrypt simply prompting you to type a lot of noise simply because they did not wholly trust their supposed hardware randomness sources.

The #ifndef vs #if thing is likewise fun -- sure, usually it is not that harmful.

I will go out on a limb and say that this seems exactly the kind of bug an enterprising cybercriminal would discover with the help of an unfettered LLM these days. Being a hardware wallet where all the paranoid people park their coins makes it a juicy target, of course.

you should worry about "what if my niche crypto implementation is not as secure as anticipated?"

Or in this case, "What if the person writing it is a blind idiot monkey?"

Getting true random noise is trivially easy in microcontrollers and only a complete idiot would use something like micropython in such security critical application.

Key generated from low entropy PRNG" is a failure mode we had before.

The rather infamous Debian SSH key generation vulnerability was like this, and was way back in 2008. Ironically, that one was introduced by following the guidance of an automated security checking tool, and impacted Debian and related distributions.

Someone did point out this vulnerability was discovered shortly after one frontier model or another was released. But then again, there are new models every day, so who knows.

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