If you generated your Bitcoin seed phrase on a ColdCard hardware wallet after February 2021 and you did not use at least 50 dice rolls (100 is better) for custom entropy, and you did not use a passphrase or better than 2-of-3 multisig, please stop reading this now and move your coins to a safer wallet.

On July 29th, a large scale attack on Bitcoin wallets was launched. I’m not an expert, but the following appears to be known and confirmed:

In March 2021, the firmware for ColdCard hardware wallets was changed. The new version had an error that caused those hardware wallets to use significantly less entropy when generating what were supposed to be random seed phrases.

Picture an ocean vs a pool.

This flaw was discovered by a hacker, most likely using AI to search the ColdCard firmware for exploits.

The hacker generated Bitcoin seed phrases using the same flawed method as ColdCard. Instead of having to search the entire globe’s oceans, he was searching a pool, and he was the only one who knew how much was there, none of which was supposed to be there in the first place.

It is very likely, the hacker spent months searching the limited pool of possible seed phrases a ColdCard could produce, due to ColdCard’s borked firmware.

Presumably, once the hacker found enough Bitcoin to make it worth exposing the exploit he was using to find it, he stole all of the Bitcoin in one fell swoop.

As I said, this flaw was introduced to ColdCard’s firmware in 2021. Five fucking years ago. I believe it went unnoticed because ColdCard’s firmware is not truly open source. It is only “Source Verifiable” and that difference is a big fucking deal.

Open source means other developers can use that code in their own work. Bitcoin is open source. Trezor hardware wallets are open source.

ColdCard was not open source. Their code was only “Source Verifiable,” which meant anyone could read it, but since other devs couldn’t use it in their own work, they had little reason to read it and no opportunity to battle-test the code through real work. Thus, this bug went unnoticed for five and a half years, until a hacker found it and exploited it.

Making matters worse, every hacker worldwide now knows about the flawed ColdCard method of generating seed phrases. It appears that many more hackers are now duplicating the method to search for Bitcoin to steal.

The situation is only going to get worse.

One has to assume any Bitcoin wallet generated on a ColdCard after March 2021, when the flaw was introduced into the firmware, will be found and drained if the owner of that wallet didn’t use custom entropy or a passphrase.

That is an oversimplification, but I hope it explains the gist of what’s happening.

I believe even 2-of-3 multisig wallets are at risk because hackers now know how small the pool of possible seed phrases generated by ColdCard hardware wallets is. They can duplicate the pool and search those seed phrases for combinations of 2-of-3 multisig wallets.

I admit, as I write this, I am very upset. Unbefuckinglievably upset.

I dedicated over a year of my life to writing a novel about a Bitcoin thief in hopes of encouraging those who own Bitcoin to take the security of their coins seriously.

It upsets me... No. It enrages me to think people who did self custody right are being robbed, but they are. They’re being robbed because Coinkite, the maker of ColdCard hardware wallets, failed at their one and only fucking job.

This is not a flaw in Bitcoin.

This is a flaw in the code for one brand of Bitcoin wallet. ColdCard.

P.S. Fuck you, Rodolfo Novak, CEO and founder of Coinkite. Your hubris and your greed caused this. The day you changed your code from being Open Source to only being Source Verifiable, you lit the fuse. This is the bomb going off. You caused this. Bugs happen, but if your code had remained open source, it’s likely this bug would have been found five years ago. You need to resign immediately.

In light of the ongoing Bitcoin thefts, I want to remind readers that the point of my novel, Five Dollar Wrench, is to encourage those who own Bitcoin to take the security of their coins seriously.

I wrote the novel to help people avoid in-person social engineering attacks.

If you own Bitcoin and you do self custody, I’ve also written the following post in hopes of avoid the next ColdCard-style attack, because there will be more, and these thefts are preventable.

H. E. B.

Preventing Bitcoin's Next ColdCard-Style Attack

On July 29th, 594 BTC was stolen. Over 500 wallets were drained. And this is an early estimate, as the situation is still unfolding. Some reports suggest as much as 1,082 BTC may have been stolen…

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9 days ago · 1 like · H. E. Tobe (Literary Fiction)

These thefts are preventable.

Please share this with anyone you know whose coins may be at risk.

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It appears that the drained wallets were generated on ColdCard Mark 3 devices, though that aspect of the heist is still unfolding.

What’s becoming clear is this: Hackers did not break encryption. They found an exploit in how the firmware for certain devices generated seed phrases which were not truly random.

It’s very likely hackers spent months if not longer generating seed phrases using the same method older ColdCards use, and testing them for wallets with balances.

When the hackers found enough wallets with coins to make it worth exposing their method, they drained all of the wallets in one fell swoop.

On other words, if hackers drained a wallet yesterday, it’s likely they had access to that wallet for weeks, if not months. But they waited to drain the wallets in order to prevent anyone from knowing their wallets might be in danger.

How To Protect Yourself

1. Switch to a fully open source hardware wallet.

When ColdCard switched their code from being open source to “source verifiable” they blocked other developers from being able to legally use their code. This decreased the number of developers regularly reading their code.

Fewer devs reading the code meant fewer experts finding errors in the code, which meant fewer errors being found and fixed.

Hackers found an error and they exploited it to vicious effect. Over 500 wallets were drained.

Fuck ColdCard and their “source verifiable” code.

Never trust your Bitcoin to code that is not fully open source. No exceptions.

If you’re a beginner, Trezor is by far the best choice. Their firmware is fully open source and probably has the most developers’ eyes on it, which means issues are found and fixed.

If your skills are more advanced, I strongly recommend ShieldSigner. ShieldSigner is a fork of SeedSigner that adds encryption features and other advanced security. It is fully open source, but I stress that it is advanced.

2. Move your coins to a seed phrase you generate yourself, but take great care to do this right.

One way to generate your own seed phrase is to print the BIP39 word list. Print the list with a word on each line, and a blank line between. Use scissors to cut the paper into strips with a word on each strip. Put the strips in a giant popcorn bowl.

Pick a word. Write it down. Put the strip back in the bowl and stir them up to scramble ‘em. Pick another word.

Do this 23 times.

Enter those 23 random words in your hardware wallet and let it generate the 24th word for you. The 24th word is a checksum, meaning, it mathematically confirms the seed phrase is valid. It’s safe to let a hardware wallet generate the last word for you. With a 24 word seed phrase, there are usually only 7 or 8 words that can form a valid checksum... meaning... once you enter the first 23 random words, the 24th word will be one of only 7 or 8.

Do not pick words you like. It is very important to use random words. Randomness keeps your Bitcoin safe. The ColdCard hack happened because hackers found an error that prevented seeds generated using certain ColdCard firmware from being random. That meant they could find wallets because they had fewer seeds to search.

Realistically, a truly random seed phrase can’t be hacked.

Non-random seed phrases are hackable. ColdCard just proved it.

Never trust a seed phrase generated by code. Make your own. Do it by hand. But do it right. Make it random. No exceptions.

This method eliminates an entire class of failures that lead to disaster: bugs, backdoors, or implementation mistakes in software RNGs.

The security of a wallet is only as strong as the randomness used to create it. People suck at randomness, but errors in code can lead to flaws in randomness that enable hackers to find wallets.

Make your own seed phrase, but do it right to guarantee randomness.

P.S. What about using dice rolls? Using dice to generate your own entropy is fine IF you use at least 100 dice rolls and IF you check the wallet generated by dice rolls on two different kinds of hardware wallets, to confirm you got the same seed phrase both times.

3. Use a passphrase.

Wallets were drained in the ColdCard exploit because those wallets didn’t use a passphrase. A passphrase prevents someone who finds your seed phrase from finding any coins.

Here’s how.

A wallet is generated using entropy.

If you only use a seed phrase, that seed phrase is the entropy for your wallet. Anyone who finds your seed phrase can steal your wallet. These hackers had to have tested billions of seed phrases to find wallets with coins.

If you use a seed phrase and a passphrase, the seed phrase and passphrase are the entropy for your wallet. If a hacker is hunting for wallets, they won’t find anything when they test your seed phrase, because that wallet isn’t where your coins are.

A seed phrase generates a wallet.

A seed phrase and a passphrase generate a totally different wallet.

Here’s the catch: This wallet is based on every word in your seed phrase and every character in your passphrase. If you change anything, you’ll generate a totally different wallet, which means you could lose your coins.

Here’s how to generate a passphrase safely: Use random words, all in lowercase, with a space between each word. Best practice: Use 6 words or more.

Do not use wacky characters or symbols. You want a passphrase you can easily read and correctly enter every time.

Using a passphrase prevents seed phrase hunters from getting your coins.

4. Create Strong Backups And Store Them Securely.

Through the years, a lot of Bitcoin has been lost because people didn’t write down their seed words. “It’s in the hardware wallet. I’m good.” No, you’re catastrophically wrong. Back in my early days of being a Ledger user (never again!) a borked firmware update wiped out my wallet. I had to restore my wallet from scratch. That was fine since I’d written down my seed words, but anyone who didn’t got hosed, and it was their own fault.

Write your seed phrase on paper. Make a metal backup in case the paper gets damaged. Write your passphrase on paper. Make a metal backup in case the paper gets damaged. Store these items somewhere a thief cannot find them. Best practice: Store them separately.

Believe it or not, Bitcoin has been lost because coffee got spilled. Paper backups aren’t a reliable long term solution. Metal backups are.

5. Test Everything To Avoid Future Disasters.

Before sending coins to a new wallet, save a copy of the first address, Then wipe out the wallet and manually restore it from scratch using the seed phrase and passphrase (or multisig) to confirm you get the same first address. Doing this confirms you can restore your wallet from scratch if anything goes wrong. Do this before sending any coins to your wallet.

Please!

I am literally begging you to take the security of your Bitcoin seriously.

I care so much about this that I literally spent a year writing a novel about a Bitcoin thief in order to encourage people to think about what they tell people and how they secure their seed phrases. That’s an entirely different kind of theft than the exploit we learned about yesterday, but it’s important to understand too.

My novel is titled Five Dollar Wrench, and I encourage you to read it.

Five Dollar Wrench

Table Of Contents

This is the story of how a girl from nowhere becomes a thief nobody sees coming. She says she’s a ghost. This is her confession. It comes with a Five Dollar Wrench…

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16 days ago · 38 likes · 16 comments · H. E. Tobe (Literary Fiction)

It’s up to us to help each other to stay safe.

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Long answer? Lotsa biiiiig numbers.

Bitcoin seed phrases provide an incredible amount of security. In fact, “incredible” is an astonishing understatement.

Let’s define exactly what we’re talking about here:

A targeted attack is when someone tries to guess your seed phrase. That’s obvious. A “collision” is when someone generates the same seed phrase as you without trying to. That would be like someone generating a new wallet and finding coins there.

Let’s Talk About The Odds Of Somebody Guessing Or Randomly Getting Your Seed Phrase:

Do you play the lottery?

A Powerball ticket is only $2, and all you have to do to win is pick 5 numbers from 1 to 69, plus a Powerball number from 1 to 26. Sounds easy, right? You don’t even have to get the order of the numbers right. Just guess the correct numbers.

If you guess the first 5 numbers correctly, you win a million bucks. The odds of that happening are 1 in 11,238,513.

If you guess all 6 numbers correctly, you win the jackpot, which is currently at $526 million dollars as I type this. The odds of that are 1 in 292,201,338.

Notice how adding just one more number made the odds drastically harder?

Now, let’s compare that to Bitcoin seed phrases. Remember: Powerball numbers go from 1 to 69. The Bitcoin word list has 2,048 words. And unlike Powerball, the words in a Bitcoin seed phrase need to be in the right order.

Here are the odds of someone randomly guessing a seed phrase.

For a 12 word seed phrase, the odds are:

1 in 340,282,366,920,938,463,463,374,607,431,768,211,456.

For a 24-word seed phrase, the odds are:

1 in 115,792,089,237,316,195,423,570,985,008,687,907,853,269,984,665,640,564,039,457,584,007,913,129,639,936

That number is so large, it’s practically incomprehensible.

To Put It In Perspective:

A grain of sand…

There are an estimated 7,500,000,000,000,000,000 grains of sand on Earth. That’s 7.5 quintillion! And that number is tiny compared to the total number of possible seed phrases. Wow.

Atoms in a grain of sand…

A single grain of sand has roughly 10,000,000,000,000,000,000 atoms. 10 quintillion! Multiply that by the total number of grains of sand. It’s still nowhere near the total number of seed phrase combinations.

Atoms in the entire EARTH?

There are roughly 133,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 atoms on Earth. That’s 133 duodecillion. I didn’t even know that word existed until I looked it up.

That’s still nowhere close to the number of possible seed phrase combinations.

All of this assumes your seed phrase was created properly, which is to say, generated randomly. I remember seeing a post years ago by some dudes who were creating what they called Seed Phrase Poetry. Their thinking was, “Pick your own words from the list to create sentences you can easily remember. Smart! Right?” WRONG. And stupid. Seed phrases like that can be guessed. And, also? Ooooof.

What About Using A Supercomputer To Crack A Seed Phrase?

The number of possible seed phrase combinations is so unfathomably large that even if every supercomputer on Earth was dedicated to searching random seed phrases to find any that have a balance, the odds of finding one would still be effectively zero. Not in a hundred years. Not in a thousand years. The sun would collapse and run out of energy first.

The Bottom Line:

A randomly generated Bitcoin seed phrase offers incredible security. Nobody can possibly guess it, and nobody is going to randomly generate the same seed phrase as you.

Hooray for safety! But don’t forget: Write your seed phrase on paper. Make a metal backup. Store your backups somewhere only you have access to. And keep it secret. Secrecy helps you keep it safe.

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I’m the author of Five Dollar Wrench, the True Confession of a Bitcoin Thief.

It’s a novel, which means, it’s fiction, but physical attacks to steal Bitcoin are very real. The thief in Five Dollar Wrench is not a hacker. She uses clever schemes to get into people’s homes so she can find seed phrases. The novel is based on a real thief, although I assume that thief only robbed one person, because she was somebody’s pissed off ex-girlfriend.

I wrote Five Dollar Wrench to help people stay safe by encouraging them (you!) to think about ways everyday security is compromised.

Wearing a video game T-shirt tells people you like video games, but wearing a Bitcoin T-shirt tells thieves you could be a mark. I know nobody wants to think about things like that… but you should. Safety matters.

I’m publishing the novel on Substack. Entirely free.

The story begins here:

Five Dollar Wrench

01. This Is My Confession

Five Dollar Wrench is a novel…

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5 months ago · 28 likes · 14 comments · H. E. Tobe (Literary Fiction)

Five easy steps:

1. Buy a hardware wallet direct from the manufacturer. Not sure which to get? You can’t go wrong with a Trezor. Trezors are easy to use and open source. Bitcoin is open source. Your hardware wallet should be, too. Never use a hardware wallet that isn’t open source. Do not trust a hardware wallet that is “mostly” open source. Mostly open means partly untrustworthy.

2. If you’re using a Trezor, let the device generate a random seed phrase for you. The words are used as entropy, which means, they’re your unique part of the math that generates your Bitcoin wallet. This is why you can restore your wallet on any device or app using the same seed words.

3. Write your seed phrase on paper. This is the backup of your wallet. Make a copy of your seed phrase using metal, in case the paper gets damaged. Never type the words on your computer or phone, no matter what. Never type your words in an app, no matter what. This keeps you safe from hackers.

4. Store the paper and metal backups of your seed phrase somewhere only you have access to. A thief can’t use your seed phrase to rob you if the thief can’t find it.

5. Before sending Bitcoin to a new wallet, save a copy of the wallet’s first address on your computer or phone. Then, wipe out the wallet and restore it from scratch using the seed phrase you wrote down. If you got the same first address, you proved you know how to restore your wallet if anything goes wrong. Hooray!

P.S. Don’t tell anyone you own Bitcoin. Keeping it secret helps you keep it safe. And speaking of safety, here’s an excerpt from my novel, Five Dollar Wrench, the True Confession of a Bitcoin Thief.

“It’s a meme, Claire. In Bitcoin, Five Dollar Wrench is the term for beating somebody senseless with a cheap blunt object until they give ya their coins. And y’know what? It works. But it’s ugly, and it comes with too much risk. Our way is smarter.”

When I get somebody’s coins, he has no idea how it happened, because he doesn’t know I exist. He thinks he got hacked online. And if he sees Claire around town, she can wave and smile, ‘cause she’s just a girl he went on a date with a while ago.

Look, I know this makes you cringe, but let’s be honest. There are three reasons why my way works, and for your convenience, I’ll list them.

One: Marks make themselves known. That’s how I spot ‘em.

Two: They don’t secure their seed words. That’s how I get ‘em.

Three: Even if you tell Bitcoiners how they put themselves at risk, they’ll say you’re wrong and double-down on doing it wrong.

So here’s some advice, courtesy of a courteous thief:

Don’t tell people you own Bitcoin. Secrecy is security.

Store your seed words somewhere safe. Keep ‘em off your computer or phone, so hackers can’t get ‘em. But you also need to keep ‘em somewhere a thief can’t find ‘em.

Do that, or be prepared for the consequences. And as the Five Dollar Wrench meme suggests, the consequences can be a lot worse than some chick with a Polaroid camera searching your home when you’re not home.

I’m just sayin’.

Want to read the novel? I’m posting it on Substack, entirely free. Here’s the Table Of Contents, and here’s where the story begins:

Five Dollar Wrench

01. This Is My Confession

Five Dollar Wrench is a novel…

Read more

5 months ago · 27 likes · 14 comments · H. E. Tobe (Literary Fiction)

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Safety ain’t sexy, but nothing matters more.
— A Fact

I’m the author of a novel titled Five Dollar Wrench, the True Confession of a Bitcoin Thief.

My goal for the novel is to help people keep themselves and their Bitcoin safe. I hope to do this by telling a story that makes people think about the responsibilities that come with Bitcoin ownership.

Here are a few things I wish more hodlers understood:

1: Secrecy Is Security.

Social engineering attacks are real, and they’re preventable. These attacks will surely become more common and more sophisticated. The easiest way to protect yourself is secrecy. A thief can’t steal what a thief doesn’t know you own. Whether you own vintage baseball cards or Bitcoin, keeping it secret helps keep it safe. If you use a hardware wallet, keep that secret too.

2: Coins Aren’t In Your Wallet.

Bitcoin is on the blockchain. It’s not on your phone or your computer. It’s not in your hardware wallet either. And it is not in an app. Your wallet holds the keys needed to access your coins. When your wallet shows your Bitcoin balance, it does this by looking up your addresses on the blockchain. Coins are on the blockchain.

3: Seed Words Are Entropy.

The words in a seed phrase are entropy. In other words, they’re your part of the math that generates all of the addresses and keys in your Bitcoin wallet. This is why seed words are random. Being random prevents anyone from being able to guess the entropy used to generate your wallet.

4: Wallets Can Be Recovered.

You can recover your wallet on a new device by entering your seed phrase. This works because, by entering your seed phrase, what you’re actually doing is restoring the entropy used to create your wallet. This also means anyone who finds your seed phrase can restore your wallet too, because they found the entropy used to create your wallet.

5: You Must Make Wallet Backups.

Your seed phrase is the backup for your wallet. A lot of Bitcoin has been lost by people who either didn’t write down their seed phrase, or did something foolish like write the words but split them up. That’s why they couldn’t recover their wallets when something went wrong. Don’t let that happen to you. Write your seed phrase on paper. Make a metal backup in case the paper gets damaged.

6: You Must Secure Your Backups.

Store the paper and metal backups somewhere only you have access to. A thief can’t steal what a thief can’t find. Never enter your seed phrase on your computer, phone, or any device that can connect to the internet. By keeping your seed phrase 100% offline, you make your Bitcoin unhackable. By keeping your seed phrase secure, you make your Bitcoin unstealable. By not telling people you own Bitcoin, you avoid making yourself a target for theft, which can include violence.

7: Think Long Term.

Don’t judge the value of your Bitcoin by what it’s worth today. Don’t judge your security by how safe you feel today. And don’t judge the future by what you know today. Think long term, hold long term, and always keep learning.

Note:

I’ve simplified some things here, for the sake of making it easy to understand. For example, I said that a wallet holds keys. More accurately, a wallet uses your seed to derive the keys and other cryptographic information needed to access your Bitcoin. Likewise, seed words aren't technically the entropy. They are the entropy, encoded.

Securing Your Bitcoin Is Your Job.

This is serious stuff. I wrote Five Dollar Wrench in the hopes of encouraging you to seriously think about it.

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P.S. If you haven’t read
Five Dollar Wrench,
I’m posting it here.

I’m posting the novel here on Substack, in its entirety. No strings attached.

I wrote the novel to entertain people with the tale of a clever thief, but the novel serves a deeper purpose.

My real goal is to help people keep themselves and their Bitcoin safe.

Two Things Inspired The Novel:

First, a few years ago, I was reading a post on reddit by a guy who said his hardware wallet got hacked.

He said, “I thought these things were safe!!!”

A bunch of people chimed in with typical questions about which hardware wallet he used, and there was chatter about whether secure element chips or bluetooth could be hacked.

But a few people asked where he stored the paper backup of his seed phrase.

“I’m using a hardware wallet,” he said. “And nobody knows my PIN! I got hacked!!!”

If you haven’t already figured out the issue, you’ll know when I tell you what happened next.

People started clicking on his reddit username to see if there were any clues about the situation, and there was a biggin’:

It was a Sunday when he posted about his hardware wallet getting hacked. But two days earlier, he posted on reddit about dumping his girlfriend.

Think about that timeline:

Friday, he dumped his girlfriend.

Sunday, his wallet got drained.

Gee, I wonder what happened on Saturday. Did the now-ex-girlfriend drop by his place to get her stuff? Did she maybe search for his seed phrase so she could snap a pic?

I bet she did.

I’m also willing to bet he talked about Bitcoin a lot, so she knew what she was looking for. Maybe she snapped a pic of his seed phrase weeks earlier, when she got the feeling he was having doubts about their relationship.

The second thing that inspired me to write the novel Five Dollar Wrench was an interaction with a stranger at a bar, in early November 2024.

Bitcoin was hitting an all time highs that week, and a guy at the bar was bragging. “I’m making a killing on Bitcoin,” he said. I thought about how easy it would be for somebody to rob him.

Before I knew it, I was running home to start writing the opening scene for a novel about a Bitcoin thief. Much of what I wrote that night is still in the novel today.

About The Story:

The main character in Five Dollar Wrench is a thief, but she isn’t a hacker. She does it old-school. Call it the new old-school.

“We’re gonna rob them all, and they’ll never know who did it. They won’t even know how it happened.”

How does she do it? Social engineering.

“Social what whut?”

“Social engineering. That’s the term for our shtick. You get into their lives so I can get into their homes.”

Elmer Fudd was hunting wabbits, but Dandy Bowman is hunting seed phrase backups.

Look, I know this makes you cringe, but let’s be honest. There are three reasons why my way works, and for your convenience, I’ll list them.

One: Marks make themselves known. That’s how I spot ‘em.

Two: They don’t secure their seed words. That’s how I get ‘em.

Three: Even if you tell Bitcoiners how they put themselves at risk, they’ll say you’re wrong and double-down on doing it wrong.

To be clear:

I do not endorse or condone theft.

Five Dollar Wrench is not an instruction manual. It is a cautionary tale about the dangers of social engineering and misplaced trust.

Bitcoin owners have been robbed by friends and lovers, even family. Others have been robbed by strangers, sometimes through violence.

These crimes are preventable.

Owning Bitcoin means being your own bank.

Securing your Bitcoin is your job.

The easiest place to begin?

Secrecy.

Secrecy is your first line of defense against social engineering attacks. If nobody knows you own Bitcoin, nobody tries to steal it from you.

Simply put, don’t make yourself a mark.

That’s the lesson of the novel Five Dollar Wrench.

Here’s where the story begins:

Five Dollar Wrench

01. This Is My Confession

Five Dollar Wrench is a novel…

Read more

5 months ago · 25 likes · 12 comments · H. E. Tobe (Literary Fiction)

And here’s the Table Of Contents. That’s a good link to bookmark because every scene from the novel is listed and linked. I post new scenes from the novel every Monday, Wednesday and Friday, until the entire novel has been posted.

P.S. Think long term. Stay safe. And always keep learning.

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