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The bigger disaster is awaiting. hackers are now reviewing source code of everything crypto related for entropy or other misconfiguration bugs, automated with leading AI models , which will spot errors humans missed. We're talking wallets dating back to 2010 when btc was founded, and then for all the altcoins. Ppl don't realize how bad this will get when exploit detection can be done at scale with LLMs. Ai can review a codebase in minutes, which would take humans days, if ever. Coldcard is a tiny wallet service. A bigger one would have losses in excess of billions. A hacker will first find the vulnerability and then exhaust the keyspace and download the blockchain to cue up the keys and do it all at once .
Better now than later. It would have been even better a decade ago, but here we are.
Will this just trigger a crypto arms race? Bigger and tougher proof of work?
Unlikely. The digital signatures bitcoin uses are regarded as secure, (there could be attacks if we get quantum computers.) The issue here was the software didn't put in enough randomness when generating the keys, and so it was straight forward to search the small space of keys the wallet would generate.

It's not so different if you encrypted a file with a weak password and someone guessed it—you don't need stronger encryption, you need to pick a better password.

The proof of work part of bitcoin is really for "consensus", so everyone agrees which transactions happened in which order, this attack didn't affect that part at all.

The issue is they forked sane GPL code (Trezor's), then decided they wanted no one to be able to copy them in turn so they rewrote components and messed up entropy. IIRC they intended to still use the secure element to generate some but it failed open and had no meaningful tests to detect so, leading to significantly fewer bytes for years.

Tests should have caught that, and it should not have simply failed open during the most critical part of entropy generation.

Claude has found some weaknesses in other schemes, but not fully breaking anything yet:

https://www.anthropic.com/research/discovering-cryptographic...

I am always hopeful that something like this might kill cryptocurrency (although I don't believe it will) - if a critical mass lose confidence in it, the network effect would collapse and people might stop wasting terawatt-hours of power on NFTs and exit scams.
why do you care so much about that? NFTs are basically dead already and crypto is still somewhat niche

like, why does it even matter? I doubt the energy usage is anywhere near AI workloads running today

Setting aside any utility it might have, crypto has lots of negative externalities besides energy usage. The event under discussion, for example.
In what way is energy usage in creating money a negative?

e.g.

If money took no energy to create, what would it be worth? What if you limited its effortless creation to just a few people?

What do you think about the enormous energy usage (far more than bitcoin) in mining gold?

This has nothing to do with proof of work
Need more GPUs.
the thief appears sloppy in how they stole the coins. multiple waves, linking outputs together etc.
Yep, also greedy. If he only emptied a few large wallets and sent them to different addresses each also not all at the same time the vulnerability may not have been discovered so quickly.

Most would have blamed the card holder as was seen in the initial few posts that showed up on reddit.

would be interesting to see what happens to them when they're found, shame we'll never know.
Unless they trade the already tainted BTCs into XMR we very likely will once they try to cash out.
Oh I've no doubt some people will figure out who it was, it's their fate we won't be privy to, but I'm certain it won't be pretty.
Who would ever trust the built-in seed generation of a wallet? Diceware, write them down, then enter them into the wallet.
Because it's a hardware wallet. Usually these are designed to provide security by generating their own private keys and never letting the private key leave the hardware wallet. If you input the private key, you don't have the same security level.
If you never backed up the keys, any failure of the hardware/software results in loss of everything. Maybe you'd buy multiple of them and copy the keys over.

You trust diceware because you can trust the dice to give random numbers, and the whole process is visible before you. Even with a non-malicious wallet, you have to trust that they competently implemented the random generator and no bugs have crept in over hardware/software revisions.

Yes, a different security level - in this case, possibly a better one!
Only in this case, where your hardware wallet is severely compromised. But if you believe your hardware wallet is compromised, why are you using it?
I am not =]

Outsource trust carefully, kids!