Rails of Change: The Race to Redefine Payments

I think there's definitely some news that we need to cover.

David, do you want to start us off with some news about cold card?

This is a sort of a sad story to cover, but around July 30th, people started noticing on chain that there were some suspicious movements of funds related to cold card wallets and And I guess to back up, cold cards are Bitcoin only cold hardware wallets made by a company called CoinKite.

And these were very popular among the Bitcoin crowd, especially the Bitcoin only crowd.

A lot of people like the fact that cold card wallets were Bitcoin only because it means things like their firmware only contains code to handle Bitcoin transactions.

And there's not, you know, a bunch of call it altcoin software and code commingled with the bitcoins, you know, inside the build of the wallet.

So anyways, people started noticing these irregular movements on chain shortly after CoinKite came out with a blog post saying that there was an issue in the random number generation for seed phrases that were generated with certain versions of the firmware.

You could have used your cold card to generate a seed phrase in a private key a few years ago on a certain firmware version that was affected.

And even if you had updated your firmware since then, because your seed phrase was generated on an older firmware version, you were still affected.

So this is effectively what CoinKite said in their blog post.

They're saying if you generated a seed phrase on these firmware versions, you're at risk.

And these versions spanned a few years.

And so once this was disclosed, it created a race from lots of actors out there to see if they can exploit these seed phrases.

And so the attack has sort of been ongoing,

likely by multiple parties at this point.

And so thousands of accounts have been affected at this point.

I think the the total amount swept in dollar terms is well over 100 million at this point.

And it just it's it's tough because, you know, the users of these hardware wallets were following best practices, didn't really do anything wrong and were still affected.

You know, in a lot of cases they went out of their way to do something that they thought would secure their coins even better by using a cold hardware wallet rather than keeping their funds on an exchange or something and were still affected and so there's a lot of interesting things to discuss here one is had coin kite noticed this vulnerability how would they have disclosed it in a way that didn't create a race to exploit it.

If they said, hey, if you generated your seed appraisals on these firmware versions, you need to move your funds to a new account, it would still effectively broadcast the message that these funds are at risk.

I think even if they wanted to disclose this responsibly, it would probably be difficult.

And the other side of this is the AI angle.

So we don't know if AI was used to find this exploit or not.

But what we do know is that open source models can find it.

So people have gone and used open source models that were, you know, that came out before this had been discussed online and have shown that like GLM 5.2 and older versions can actually identify this random number generator bug.