Cold bitcoin storage has long been considered the calmest option for those who don’t want to keep cryptocurrency on an exchange or in a hot wallet. But a series of incidents involving Coldcard, SafePal, and Trezor showed: even a hardware crypto wallet does not free the owner from all risks, and firmware bugs, personal data leaks, and phishing can lead to losses or put users at risk.
What Is a Cold Wallet and How Is It Different From a Hot Wallet
A cold wallet is a way to store private keys and a seed phrase without a constant internet connection. Its purpose is isolation: the less often keys come into contact with the online environment, the less likely they are to be intercepted by malware, a phishing site, or a hacked service.
A hot wallet, on the other hand, operates in an environment that regularly goes online: this can be a mobile app, a browser extension, or a program on a computer. It is more convenient for frequent transfers and quick operations, but usually depends more on the security of the device, internet, and the app itself.
Types of Cold Wallets
- Hardware wallets: separate devices for generating and storing keys offline. This type includes Coldcard, Trezor, Ledger, and SafePal.
- Paper wallets: the private key or seed phrase is written on paper. This option is simple but easily suffers from water, fire, theft, or ordinary loss.
- Metal storage: the seed phrase is transferred to a metal plate to protect the backup from fire, moisture, and mechanical damage.
- Offline computer: keys are created and stored on a device that is not used for regular internet work.
A cold wallet works on a simple principle: the private key is created and remains outside of constant online access, and only the signed transaction is sent out. The network sees a valid signature, but the key itself should not leave the protected environment.
How to Create and Choose a Cold Bitcoin Wallet
For the hardware option, the basic scenario looks like this: buy a device from the manufacturer or a trusted seller, check the packaging and firmware, create a new seed phrase yourself, write it down offline, make a test transfer for a small amount, and only then transfer the main funds. If using the paper option or an offline computer, keys should be created on a device without regular internet access and the seed phrase should not be transferred to the cloud, messengers, or phone notes.
- Buy a new device and avoid wallets with a pre-generated seed phrase.
- Create the seed phrase yourself, do not import it from a dubious source.
- Write the backup on paper or metal, but do not photograph it or store it in the cloud.
- Check the recipient address on the device screen before confirming the transfer.
- Update firmware and follow manufacturer messages about security risks.
There is no single best cold wallet for everyone: the choice depends on the amount, experience, convenience of recovery, and trust in the manufacturer. Coldcard is often chosen for strict cold storage, but the story with Mk2 and Mk3 shows why fresh firmware and safe seed generation are important. Trezor emphasizes its own key generation and warns about the risk of imported phrases. Ledger uses Secure Element and a True Random Number Generator, but like any hardware wallet, requires careful backup. SafePal remains a popular device, but its case is a reminder that the owner’s personal data also needs protection.
When choosing a reliable cold wallet, you should look not only at the brand. The manufacturer’s reputation, the quality of the random number generator, update support, clear access recovery, seed phrase protection, convenience of address verification, and purchase through a secure channel are important.
- Common mistake: storing the seed phrase in a photo, screenshot, cloud, or email.
- Common mistake: entering the seed phrase on a site pretending to be support.
- Common mistake: not making a test transaction before a large transfer.
- Common mistake: postponing firmware updates for years.
- Common mistake: keeping the device and backup in one place without physical protection.
Coldcard: An Old Vulnerability Led to the Loss of Thousands of Bitcoins
Coldcard, the hardware wallet from Canadian company Coinkite, was the first to take a major hit. On the very first day, device owners lost 1,082.65 BTC, which at the time exceeded $70.2 million. The total damage, according to various estimates, ranged from 1,778.84 to 2,417.35 BTC, or about $115-153 million.
The weak point turned out to be in seed phrase generation. In a normal scheme, it should be created randomly so that the private key is almost impossible to guess. However, due to a firmware bug, some phrases became vulnerable to brute force—combinatorial guessing. Entropy, which should have remained at 128 bits, dropped to 72 bits on some devices and to 40 bits on others.
The reason was the source of entropy. Instead of a hardware generator, a software approach was used, which included typical data, including time values. For a public key cryptosystem, such an error is critical: if the private key becomes more predictable, the entire protection structure loses stability.
The most unpleasant part of this story is the age of the vulnerability. It appeared back in 2021, meaning it existed for about five years. Theoretically, attackers could have exploited it long ago, but real attacks only unfolded now. The most affected were old Coldcard models, primarily Mk2 and Mk3.
Why is entropy so important? 128 bits can be imagined as an almost unattainable number of options: if you take every star in the observable universe as one combination, you would need stars from hundreds of trillions of such universes to brute-force the required number. Losing even a few dozen bits sharply reduces the search space and makes the attack much more realistic.
Coinkite released a fixed firmware. Users whose devices could be at risk were advised to create a new seed phrase, test the new wallet with a transaction, and transfer the remaining funds there. Formally, the problem affected Coldcard, but the reputational blow hit the entire hardware wallet segment.
What Trezor and Ledger Said in Response
After the Coldcard incident, the two largest market players—Trezor and Ledger—quickly clarified their positions. Both companies stated that their devices were not affected by this vulnerability, but their approaches differ in detail.
Trezor emphasized: if a wallet was originally created on a vulnerable Coldcard and then its backup was imported or restored on a Trezor device, assets may still be at risk. In other words, the problem is transferred along with the seed phrase if it was generated in an unsafe way.
At the same time, Trezor stated that its own key generation is protected. The old Safe 3 and Safe 5 models use randomness via the Optiga Secure Element chip, and the newer Safe 7 uses the TROPIC01 chip. In both cases, the declared entropy length is 128 bits.
Ledger CTO Charles Guillaume also rejected the risk for the company’s devices. According to him, Ledger solutions use a True Random Number Generator, and the Secure Element chip provides 256 bits of entropy for each 24-word seed phrase. For owners, this means that backup should start with a securely created phrase, not one imported from a dubious source.
SafePal: Not Keys, but Customer Data Leaked
Another high-profile episode is linked to SafePal. From March last year to April this year, data on almost 40,000 company clients leaked online. Seed phrases, private keys, and the digital assets themselves were not part of the leak, but this does not make the incident harmless.
Attackers obtained names, physical addresses, and contact details of users. For a cryptocurrency owner, such information is dangerous in itself: they can be targeted online with phishing emails, fake notifications, malware, or attempts to trick them into giving up an account authorization token. In the worst case, personal data can also lead to offline threats.
The cause was presumably an order tracking plugin. Through it, attackers gained access to client information. SafePal fixed the issue, strengthened protection, and changed data storage rules: now, information in the processing system will remain only for 90 days. In addition, the company removed 30 sites and phishing links related to the incident.
Trezor Faced a Similar Leak Through a Partner
Later, Trezor faced a similar problem. In this case, the weak link was not the wallet manufacturer itself, but the logistics partner ShipMonk. After a hack, data of about 14,000 Trezor clients was fully or partially compromised.
The wallets did not automatically become unsafe: private keys are not stored by the logistics operator. But attackers could have obtained names, home addresses, emails, phone numbers, and other personal information. Such a set opens the door to targeted phishing, psychological pressure, and attempts to convince a person to reveal their seed phrase.
An important detail: all three stories—Coldcard, SafePal, and Trezor—became public almost at the same time. Therefore, many users perceived them as a general hardware wallet crisis, although technically these are different types of risk.
The Wallet Does Not Store Coins: Where the Real Risk Lies
To assess such incidents soberly, you need to remember a basic principle. A cryptocurrency wallet is not a safe in which Bitcoin or another cryptocurrency physically lies. Assets exist on the blockchain, and access to them is provided by the private key. The wallet only helps the user safely work with this key and sign transactions.
Any network transaction is built around a signature: the user confirms an action with the private key, and the network checks its validity. Therefore, loss of the seed phrase, its compromise, or unsuccessful backup essentially means loss of control over assets.
There are several ways to store a seed phrase, each with its own strengths and weaknesses.
- Paper: simple and requires no technology, but easy to lose, burn, or ruin with water.
- Memory: leaves no physical copy, but is only reliable in theory—a person can forget the phrase or mix up the word order.
- Metal plate: better withstands fire, moisture, and damage; such solutions are produced by major brands like Ledger with Billfodl, as well as lesser-known manufacturers. The downside is that the plate also needs to be securely hidden.
- Digital copy: convenient for quick access, but a file on a computer, USB flash drive, or in the cloud can fall into the hands of attackers.
The main rule of cold storage is simple: the seed phrase must be created securely, written down without digital copies, and stored so that no outsider can see it or it is not destroyed by water, fire, or accidental loss.
Hot wallets, mobile apps, Bluetooth connections, login via QR code, or authentication in a personal account add convenience but expand the attack surface. Malware can substitute an address, intercept data, or show the user a fake confirmation screen.
Why Some Users Are Returning to Exchanges
Amid Coldcard problems, the number of transfers on the Bitcoin network increased. The irony is that some owners sent funds back to centralized exchanges, that is, abandoned non-custodial storage in favor of custodial. Instead of self-control over keys, they again entrusted assets to trading platforms.
This choice is understandable psychologically: the exchange removes some of the technical responsibility from the user. But it does not eliminate risks. Market history already knows painful examples like , and modern platforms, including Binance and other major CEXs, still require trust in infrastructure, security procedures, and internal storage rules.
Therefore, the opposition of “hardware wallet versus exchange” oversimplifies the picture.
- Exchange advantage: it is more convenient for trading, quick transfers, and account-based access recovery.
- Exchange disadvantage: the user again depends on a third party, its infrastructure, rules, and quality of protection.
- Cold wallet advantage: private keys remain under the owner’s control and should not be constantly online.
- Cold wallet disadvantage: it requires discipline, careful seed phrase storage, updates, and protection from human error.
In both cases, the weak link can be not only technology but also the person.
Artificial Intelligence Is Changing the Rules of Attack and Defense
A separate problem is the development of artificial intelligence. The Coldcard vulnerability existed for years, but it was only in 2026 that attackers managed to use it in a real attack. Ledger’s chief human potential officer Ian Rogers noted this: in his opinion, it’s not just about hardware wallets, but about the fact that tools for finding weaknesses have become much more powerful.
Artificial intelligence works both ways. Developers get faster ways to analyze code, test firmware, and find bugs. But hacking attacks also become more effective: scammers find patterns faster, automate brute force, prepare convincing phishing scenarios, and scale attacks on users.
That is why a hardware wallet in 2026 cannot be seen as a magic item that solves all security issues. It is a powerful tool, but it requires updates, proper seed phrase generation, careful backup, and understanding where device protection ends and owner responsibility begins.
Conclusion: Cold Storage Is Not Dead, but Has Become More Demanding
The incidents with Coldcard and SafePal should be seen as separate cases, not as proof of the total failure of hardware wallets. Manufacturers use different chips, different random number generators, and different protection approaches. A bug in one solution does not mean the entire class of devices is equally vulnerable.
At the same time, what happened cannot be ignored. Cold bitcoin storage remains one of the most reliable options for most users, but only with proper setup and careful attention to the seed phrase, updates, personal data, and communication channels. In 2026, security looks less and less like a one-time device purchase and more like an ongoing practice.
{
“@context”: “https://schema.org”,
“@type”: “Article”,
“about”: [
{
“@type”: “Thing”,
“name”: “Bitcoin”
},
{
“@type”: “Thing”,
“name”: “cryptocurrency”
},
{
“@type”: “Thing”,
“name”: “cryptocurrency wallet”
},
{
“@type”: “Thing”,
“name”: “phishing”
},
{
“@type”: “Thing”,
“name”: “malware”
},
{
“@type”: “Thing”,
“name”: “backup”
},
{
“@type”: “Thing”,
“name”: “transaction”
},
{
“@type”: “Organization”,
“name”: ” ”
},
{
“@type”: “Organization”,
“name”: “Binance”
}
]
}
