Liquid Network lost nearly 4,000 BTC, Blockstream seeks contact with hackers

Liquid Network, a sidechain project designed to facilitate faster Bitcoin transactions and developed by Blockstream, confirmed a major security breach on Sunday, September 6. Nearly 4,000 BTC, worth approximately $320 million, were transferred from the Bitcoin wallet of the Liquid Federation without standard authorization.

Unauthorized peg-out and hacker communication

The transfer was executed through a process known as a peg-out, allowing Bitcoin to move from the Liquid sidechain back to the primary Bitcoin network. Liquid Federation stated that this transaction was not authorized through its usual process.

The party responsible for the withdrawal left an on-chain message using the OP_RETURN function, which read, “we are whitehats. contact us on chain.” This message was included in Bitcoin transaction c103de95817b43f2df635ec6f35ff126ca26a7c6d20570c4b01866b2b3e69a19. Liquid Federation described those behind the event as “purported white-hat hackers” and reported that Blockstream was attempting to establish contact with them via a signed on-chain response.

Blockstream is trying to reach the individuals who removed the funds using a signed message, following a withdrawal conducted outside the regular authorization pathway.