CASE STUDY | The ColdCard Bitcoin Exploit Shows the Destabilizing Impact of ‘The New AI Paradigm,’ Says CEO

Malicious actors are increasingly likely to use artificial intelligence to identify even the smallest software vulnerabilities, the maker of Coldcard Bitcoin hardware wallets has warned following a theft of over $100 million in cryptocurrency.

MILESTONE | ColdCard Bitcoin Losses Surpass $100 Million

The incident has raised fresh concerns about the security of hardware wallets which are physical devices designed to store the private keys needed to access cryptocurrency. Such wallets have long been regarded as safer than keeping digital assets on exchanges because they can remain disconnected from the internet.

However, users of some Coldcard wallets had their funds recently drained in a series of attacks. The attackers appear to have exploited a weakness in the way certain versions of the wallet generated cryptographic keys.

The devices themselves were not physically compromised or connected to the internet. Instead, the flaw meant that the wallets’ algorithms did not produce sufficiently random numbers allowing attackers to work out some of the keys.

Rodolfo Novak, CEO of Canadian ColdCard maker, CoinKite, described the incident as evidence of a changing cybersecurity environment.

“We believe this is a sober reality of the new AI paradigm,” Novak wrote in an apology over the flaw.