Bitcoin Magazine

Coinkite’s Coldcard Bug Exposed Single-Sig Risk. Multi-Vendor Multisig Is the New Bitcoin Custody Baseline

In the wake of Coldcard’s catastrophic entropy bug, self-custody advocates and experts have begun recommending a new standard, multi-vendor multisignature wallets, an approach that looks to minimize —among other threats— dependency on any single hardware wallet manufacturer.

The Coldcard entropy bug that went undiscovered since at least 2021 has taught a hard lesson to the Bitcoin self-custody advocates and users. No matter how legitimate or competent a wallet provider might seem, how well recommended and reputable, a major bug may be possible. As a result, Bitcoiners are questioning old recommendations and assumptions, including many declaring the ‘death of single sig’ the popular self-custody method of trusting the private key pair generation to one wallet alone. 

The Threat Model

Self-custody by any measure is an advanced practice in Bitcoin. Advocates recommend it as a way to protect user funds from exchange malfeasance like that seen in the cases of FTX and MtGox, among many others. But recent events have driven a revaluation of custody practices, with many bitcoin owners moving coins to exchanges — at least temporarily — while others upgrading or changing their self-custody setups altogether. Nick Neuman, CEO of Casa, claimed that 233k bitcoins moved to safety in reaction to the Coldcard hack.

To understand when self-custody makes sense and for whom, it is essential to understand your personal threat model. A threat model is the careful analysis of threats to an individual, for the purpose of designing security practices and structures ahead of time. 

A simple threat model practice can be to take a step back and think about all the possible things that worry you about self-custody, and add them to a list. Then think about all the things that advocates caution users about, and append them to that same list. Next, sort or rate items on that list based on which are most likely to happen to you, and which are most likely to happen in general. Finally, you can rank each item in the list by how catastrophic it would be if it occurred; can your current setup and plans survive the realization of that threat? 

Two of the most likely causes of loss of funds in Bitcoin self-custody are user error related to backups or forgotten passwords, and of course theft. Many of the wallets believed to be lost bitcoins that have not moved come from bad backups of private keys in the early days, resulting in data loss after a computer failed. Others simply used passwords too difficult to brute force, and then forgot them, encrypting their private keys forever.

On the theft dimension, bad entropy attacks likely rank among the most successful attacks on self-custody to date, with Coldcard joining a significant list of other wallets that have suffered bugs of the sort, intentional or otherwise, such as Trust Wallet, and many lesser-known and possibly malicious mobile wallets. In some cases, fake wallets like the iOS Sparrow Wallets simply stole user funds by keeping a copy of the user-generated private keys and sweeping the funds once deposited. In all of these examples, more thoughtful user behavior before trusting random software with your life savings is the solution. 

Once users have a clear threat model in place and a good enough understanding of the technology, designing security practices becomes more a science than an art. And while every individual has specific circumstances they need to take into account, some structures have emerged as the most resilient to most threats. One such practice becoming widely recommended and adopted among long-term self-custody Bitcoin holders is a carefully formed multisig setup. 

Multi-vendor Multisig

The term “Multi-vendor Multisig” is relatively new in the self-custody niche. The term “multisig” has nevertheless gone viral in 2026, clearly triggered by the Coldcard hack that saw the loss of over 100 million dollars worth of bitcoin, mostly from single seed wallets. Most single-seed Coldcard users appear to have generated their private keys on the device without adding an extra passphrase, extra words that add custom entropy to the private keys, nor without extra dice rolls, which do the same in a different format. 

The weak entropy from the Coldcard firmware — which users had no reason to distrust, given the company’s strong brand — in turn made guessing the related private keys easy, with a bit of custom work, which hackers eventually figured out. 

The resulting viral interest in multisig is warranted. Multisig Bitcoin wallets protect users from such hardware manufacturer errors by letting users construct a Bitcoin address that requires signing from multiple private keys and thus multiple devices, in what is known as a Bitcoin script.

Bitcoin scripts are contracts of sorts that set spending conditions for a bitcoin wallet. All Bitcoin wallets can be thought of as having some kind of script involved, with the simplest and most popular being that anyone who can sign a valid transaction can spend all or any funds therein. Multisig scripts instead require a threshold of valid signatures from different keypairs to result in a valid withdrawal. These scripts are enforced by the Bitcoin consensus rules.

Multi-vendor multisig theory posits that users should make sure every keypair used to construct a Bitcoin multisig is generated from a different wallet vendor. 

One example that is likely popular today might be the use of a Trezor Safe 7 hardware wallet with one key, a second key generated by a Ledger Nano, and a third key generated by a multisig wallet provider, considered a recovery key. A script of this sort would require any 2 valid signatures out of the three possible signatures in the setup.

By using two different hardware wallet providers, the user minimizes trust in any single wallet vendor, protecting them from an entropy failure like the one seen in Coldcard. 

Other Multisig setups can add more keys, with a 3-of-5 threshold also being common and a standard offering of a multisig-specialized wallet like Casa. It is at this point that the terminology commonly used and understood to describe Bitcoin spending software starts to break down, and as a result merits clarification.

Wallets like Casa are software interfaces that let users combine partially signed transactions from different private key pairs. In this scenario, it becomes more useful to describe ‘hardware wallets’ like Trezor or Ledger as ‘key signers’ since no single keypair in the set holds enough of the key material to spend all the Bitcoin held in the Multisig script address. 

So Casa is a Multisig wallet that lets you use a threshold of hardware signers to secure and send bitcoin funds. Fundamentally, they help users interact with Bitcoin script and create consensus-valid transactions easily. Other examples of such multisig wallet providers include Nunchuck, Sparrow desktop wallet and Unchained Capital. 

In cases like Casa and Unchained, the wallet provider offers users a recovery key controlled by the company, which some users find useful. Nunchuck and Sparrow, on the other hand, are designed for full user autonomy in this regard, though Nunchuck does offer a premium recovery key-related plan as well. 

The Upsides of Multivendor Multisig

Another benefit of a multisig wallet is its potential resistance to the infamous wrench attacks. Countries like France, which make Bitcoin and crypto ownership a matter of public record as a consequence of tax filings, have become focal points for crypto theft-related kidnapping. Self-custody or not, targets of this kind of crime are vulnerable to theft, particularly when the funds can be moved in full quickly, be it from a custodial exchange the user can access from their phone, or some self-custody setup.

Advanced forms of multisig, like multi-jurisdictional or time-locked multisig, make it so that users have to travel, ideally through an airport, in order to reach other key signers needed to construct a valid bitcoin transaction. Or perhaps the recovery key involved in the multisig has the condition that it will not sign for two weeks after the user submits the request and corresponding transaction data. The result is the removal of the final central point of failure in Bitcoin custody: the user’s own willingness to send the bitcoin, particularly when under duress.

While best practices in the case of wrench attacks broadly try to avoid ending up in that situation in the first place, making it difficult to spend your coins actually protects users from a wide range of attacks as well, including phishing schemes and other forms of social engineering that use pressure tactics to fool users into sending funds quickly. 

Multisig has also begun to enable novel forms of Bitcoin insurance, as demonstrated by AnchorWatch, a multisig wallet and insurance company that offers bitcoin theft protection denominated in BTC. The company’s services today are primarily offered to Americans through the Lloyd’s of London insurer. 

The Downsides of Multisig

One critical downside of Multisig is that the user does not only need to have access to the threshold key material needed to sign, be it two hardware wallets as in our example, or one of the hardware wallets and a recovery key from the wallet company. The user also needs to store a copy of the Multisig script or template, so that they can recreate the smart contract and thus the valid withdrawal conditions for spending. Most Multisig wallets store this information for clients, but they will also send a copy to users so they can recover independently of the Multisig wallet, should it one day go offline. 

This post Coinkite’s Coldcard Bug Exposed Single-Sig Risk. Multi-Vendor Multisig Is the New Bitcoin Custody Baseline first appeared on Bitcoin Magazine and is written by Juan Galt.

Bitcoin Magazine

I Scanned the Entire Bitcoin Blockchain for Images. What I Found Will Shock You

I scanned the Bitcoin blockchain for images; what I found will shock you. Much has been said online about the arbitrary data and content that can be found on the Bitcoin blockchain. Not only has this possibility spawned a niche art scene, but it has also led to a movement against ‘non-monetary transactions’ on the Bitcoin network. Were you to hear from one of its proponents or detractors, you’d figure the blockchain is basically a wall filled with graffiti. 

Well, I decided to put the question to the test: are there actually images on the blockchain? And what does this actually mean for Bitcoiners simply trying to run their own full node and maximize their financial sovereignty?

My methodology was simple: I was to buy a fresh hard drive to store the blockchain on, and then I was going to run classic image recovery software over the data, something used to rescue images from broken hard drives, something designed to find raw image data. 

I chose PhotoRec to do the image recovery work, an open source image recovery program that’s been around for over 20 years. The software is designed to find image files in raw data. This can be used to recover images and other file formats from hard drives that have failed or been corrupted. It is actually often used to recover lost wallet.dat files from the early days of Bitcoin wallets, before the proliferation of the seed word format. 

Syncing The Full Bitcoin Node 

For storage of the full Bitcoin blockchain, I decided to buy a 4-terabyte disk drive for a couple hundred dollars. I then installed the latest version of Bitcoin Core on it and started to sync the chain. The process, which involves downloading and verifying the accounting integrity of all transactions in Bitcoin history, took about 72 hours or three days, automated and running in the background by the Bitcoin Core software.

I did this with an otherwise powerful gaming machine; the main bottleneck in terms of time was the disk drive, which is slow to read and write data as needed when syncing Bitcoin’s blockchain. The slow part of the process involves the unspent transaction output set, or UTXO. When a user syncs the blockchain, every unspent transaction value (output) or positive balance is organized into the UTXO set, and as those values are spent, they are removed from the set, while the new address to which those satoshi were sent is added. 

On the disk drive, this UTXO indexing process could have taken three weeks according to some estimates, so to speed it up, my clanker (AI agent) suggested we index the data in RAM instead, then move the data back to the 4-terabyte disk drive. While the whole process took three days, running in the background, an SSD could have done the whole job in about a day. SSD drives are much faster than disk drives; they are more modern, but they are also easily four times the price, or more.

Once the blockchain was fully downloaded and validated, we moved the UTXO index from RAM back to the disk and booted the Bitcoin software; the chain was fully synced and the wallet ready to go. Now it was time for the next step: recovering the images stored on the blockchain.

Image Recovery on the Blockchain with PhotoRec

With the full Bitcoin blockchain on my disk drive, I turned off Bitcoin Core and asked my clanker (Cursor AI agent) to run PhotoRec 7.2 on the drive. The default PhotoRec process looks for jpg, png, gif, tif, bmp, ico, psd, and raw formats. The process ran for over 11 hours on the blockchain data and ultimately found … (drum roll) … nothing.

Over a terabyte of blockchain data and half a day of scanning and no images turned up. The PhotoRec wiki page gives a simple example of how the software works: “PhotoRec identifies a JPEG file when a block begins with: 0xff, 0xd8, 0xff, 0xe0, 0xff, 0xd8, 0xff, 0xe1, or 0xff, 0xd8, 0xff, 0xfe.” In other words, the program looks at the data on the disk for bytes that signal that there’s an image file. 

The program is capable of false positives; it saved 8 ICOs and 4 identical PNG files that don’t show any images when opened, as seen in the picture below. So, effectively no meaningful images of any kind were found. 

Where Did the Jpegs Go? XOR Magic Tricks

How is this possible? For years, crypto people have been talking about NFTs and how to engrave image data on the Bitcoin blockchain. Millions of dollars have moved in this niche, and a whole culture war is being fought on the matter as we speak. Can there really be no images on the chain? 

Turns out the risks involved with arbitrary data have been discussed and planned for in Bitcoin Core development circles for a long time, as early as 2011. XOR, a simple data obfuscation technique, is used to scramble all the blockchain data while it is at rest on a hard drive. 

You might have heard that the fundamental language of computers is made up of 0’s and 1’s. Well, in a nutshell, XOR compares two digits or bits and returns 1 if the bits are different or 0 if the bits are the same. In the case of Bitcoin, XOR compares every bit of the blockchain data to a random key generated during initial install, resulting in data at rest that other programs can find no meaning in. However, when the Bitcoin software runs, it has the key to unscramble that data and use it at will. XOR is also very fast, so it does not meaningfully impact performance. Here’s an example of the Bitcoin genesis block before and after an XOR.

XOR is currently applied to both the blockchain data and the UTXO set. XOR was initially discussed in 2014 when anti-virus software started getting tripped up by blockchain data it interpreted as virus code. The anti-virus software would then quarantine a block, corrupting the blockchain data and crashing Bitcoin, making sync impossible. By the end of 2015, XOR had been implemented on the UTXO set data at rest and in 2024 it was implemented on all blockchain data at rest. 

Incidentally, the XOR process means that no arbitrary data can be identified or extracted from the blockchain without intentionally bypassing the XOR, a process that is not necessary for monetary use of Bitcoin. Since the Bitcoin Core software keeps a simple database of the location of each scrambled block, it can get its data, unscramble it and use it in a targeted manner easily.

Syncing Bitcoin in an unscrambled way is a custom process that can take as much time as syncing from scratch, since it basically has to re-write the full terabyte of data in a new order, and there’s not much point in that for someone that just wants the normal privacy and security benefits of running a Bitcoin node. So when it comes to the vast majority of copies of the Bitcoin blockchain data, resting on the computers of normal Bitcoiners throughout the world, there’s effectively no arbitrary data or images that can be identified. Shocking, I know. Feel free to run the PhotoRec test yourself on your own node!

This post I Scanned the Entire Bitcoin Blockchain for Images. What I Found Will Shock You first appeared on Bitcoin Magazine and is written by Juan Galt.