Blockstream Refuses Ransom Demand After Hackers Steal $47M in Liquid Network Exploit

Blockstream has refused to pay a ransom to hackers who exploited a flaw in the Liquid Network sidechain, resulting in the theft of approximately $47 million worth of Bitcoin. The attack occurred on September 6, when nearly 4,000 BTC was drained from the federation reserve behind Liquid Network.

The attackers exploited a vulnerability in how Liquid nodes verified range proofs, allowing them to mint unbacked Liquid Bitcoin (L-BTC) without any real Bitcoin backing it. They then submitted this phantom L-BTC through SideSwap's peg-out infrastructure and received genuine BTC from the federation's reserves in return.

Blockstream issued a patch within 10 hours of discovering the problem, but nearly 600 BTC remains in the attackers' control. The company has characterized the incident as straightforward theft and has refused to accept the hackers' claim to white-hat status or their demand for a 10% ransom.