Recent attacks in Crypto have seen wallets drained in Bitcoin (July 26) via hard wallet Coldcard and on Cardano via software wallet SecondFI (June 2026).
The incidents resulted in an estimated $2.4 million stolen from the Cardano network and $38 million stolen from the Bitcoin network.
The worrying thing about these attacks is that neither involved user error. The attacks relied on vulnerabilities in the wallet code when generating seed phrases. (A randomly created password containing 12, 15 or 24 words).
Coinkite, the manufacturer of Coincard, stated:
“Out of an abundance of caution, Coinkite is warning all users who generated a seed using a Mk3 on version 4.0.1 (March 2021) or any subsequent version that their funds may be at risk.”
So the question is, what can entrepreneurs do, if anything, to protect themselves from this type of hack?
In this article, we look at just that and more.
Here goes…
Known Crypto Vulnerabilities
The general advice given to crypto holders is that they should keep their seed phrases safe. You should:
Never photograph your seed phrase with your phone.
Never type it into an unknown browser.
Never email seed phrases to yourself.
Never store it in the cloud.
Yet, even if you had ensured all of the above, your wallet could still be compromised if the vulnerability is at the software level at the moment of seed phrase generation.
There is nothing the average user can do to ensure that the seed phrase is properly and randomly generated.
Read this article on how not to lose everything when investing in crypto:
The Harsh Reality
These latest hacks prove that crypto users, whatever the blockchain, are not protected from wallet drain even if they do everything ‘right’ and use a trusted hardware (cold wallet) or software wallet (hot wallet).
Hardware wallets are supposed to be more secure due to the fact that they are not connected to the internet; therefore, theoretically preventing any likelihood of remote hacks.
However, as we have seen, if vulnerabilities are at the level of seed phrase generation, there is potential for seed phrases to be ‘guessed’ using sophisticated software.
The biggest takeaway is simple:
Never assume that any wallet is completely immune from vulnerabilities. Your personal security habits remain your strongest defence.
No technology is 100% safe.
Don’t be enticed by established brand names, YouTube influencer recommendations, or lulled into a false sense of security because you have been using a wallet for years.
The harsh reality is, if there is any level of software involved, there is a possibility that the code could be compromised somehow.
What Can Entrepreneurs Do?
The most important thing to realise, especially if you have large holdings, is that you should not place your entire holdings in one wallet.
Consider spreading your assets across multiple wallets, both hardware (cold wallets) and software wallets (hot wallets).
Consider creating a transaction wallet or test wallet for small transactions or to implement software upgrades prior to applying upgrades to your main wallet.
The SecondFi vulnerability, for example, occurred after a wallet upgrade, so ensure you carry out any upgrades in a low-value test wallet first, before upgrading the software of your main wallet holdings.
If the software allows it, create a secondary password that you generate yourself to add a second layer of protection if your seed phrases are compromised somehow.
Consider holding multiple hardware wallets from different manufacturers if you have large holdings and incorporate any personalised passwords if allowed to protect your assets further.
Despite the recent Coldcard attack, hardware wallets are still considered the ‘gold standard’ for protecting crypto assets since the wallet is detached from the internet, therefore reducing the likelihood of remote attacks.
Think of your crypto assets as cash.
You would not keep your entire bank account in a single pocket.
Crypto Security Checklist
Use this checklist to improve your security today:
- Store your recovery phrase offline.
- Use a hardware wallet for large holdings (Consider multiple hardware wallets).
- Keep only spending money in software hot wallets.
- Enable two-factor authentication where available.
- Download wallets only from official websites.
- Double-check every transaction before signing.
- Keep software and firmware updated. (Test first in a low-value wallet).
- Ignore unsolicited support messages.
- Never reveal your seed phrase.
- Consider using separate wallets for different purposes.
Read this article on how to spot a scam crypto project:
Final Thoughts
The recent hacks on both cold storage wallets and software hot wallets prove that even well-established and trusted names can potentially be vulnerable to hackers.
Entrepreneurs should take note that all wallets have the potential to contain vulnerabilities.
Hackers are finding more extravagant ways to take advantage of any flaws in wallet software.
These latest hacks show that if the vulnerabilities lie in the random seed phrase creation, there is little a user can do to prevent wallet drain.
To prevent the likelihood of such an exploit, entrepreneurs should ensure that they spread their holdings across multiple wallets and enable any password features if they are available.
It may also be wise to utilise multiple wallets for different purposes and only upgrade wallet software on wallets containing low-value assets first to check the effectiveness of upgrades.
Stay safe and good luck!
New to crypto? Read this article on Bitcoin, Ethereum and Cardano:
***Disclaimer: This article is not financial advice and is given for informational and entertainment purposes only. Readers should conduct their own research and not invest more than they can afford to lose. Crypto is extremely volatile, and as such can drop in value considerably without notice. Pop Up World has a global presence and is not specifically targeting any jurisdiction with its content. Any crypto references are not intended for UK businesses or consumers. You should always seek legal advice to understand if the use or investment in crypto is allowed in your jurisdiction.
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***Disclaimer: This article is not financial advice and is given for informational and entertainment purposes only. Readers should conduct their own research and not invest more than they can afford to lose. Crypto is extremely volatile, and as such can drop in value considerably without notice. Pop Up World has a global presence and is not specifically targeting any jurisdiction with its content. Any crypto references are not intended for UK businesses or consumers. You should always seek legal advice to understand if the use or investment in crypto is allowed in your jurisdiction.
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