Liquid Sidechain Paused After 4,000 BTC Leaves Wallet
Blockstream disabled the bridge nodes of its Liquid sidechain on Sunday following the withdrawal of nearly the entire bitcoin reserve backing L-BTC to an external address. According to reporting by The Defiant, the recipient identified themselves onchain as white hats.
Liquid stated that the funds left through a functioning authorization key rather than a stolen one, leaving the entry vector into the peg unexplained. The wallet backing L-BTC in circulation was left holding 197.47 BTC after the incident.
The withdrawal occurred across two transactions. The first transaction moved 2.5 BTC, while the second transferred 3,995.99999857 BTC. Both transactions were sent to an address that accumulated a total of 3,998.49748445 BTC, valued at approximately $319.5 million based on prevailing market prices.
Hours after the transfers, the receiving address consolidated the funds into a single output and included an OP_RETURN message stating they were white hats and asking for contact onchain. A minor transaction of 1,000 satoshis was sent back to the empty federation wallet.
Blockstream responded onchain roughly an hour later, sending 1,000 satoshis back to the address with instructions to contact their security team via email. Liquid subsequently released a statement confirming that roughly 4,000 BTC had been withdrawn via the SideSwap Peg-out Authorization Key, while emphasizing that the key itself was not compromised.
Bridge nodes for the network were disabled immediately following the incident to secure the remaining infrastructure while the investigation continues.
Based on reporting by thedefiant.io.
