Blockstream Stands Firm: No Ransom for Missing Bitcoin
Blockstream, the company behind the Liquid Network, a Bitcoin sidechain, has refused to pay a ransom to recover nearly 598 BTC still under the control of attackers. This decision comes after an exploit on September 6 drained almost 4,000 BTC from federation reserves.
The attack used a software flaw to create about 4,000 L-BTC without placing matching BTC behind those tokens. The attackers then used SideSwap's peg-out system to receive real Bitcoin from federation reserves. As a result, Liquid Network held about 4,200 BTC before the attack, but the exploit removed nearly 95% of those reserves, worth around $320 million at the time.
About 3,400 BTC was later returned to the federation, leaving approximately 598.5 BTC under attacker control. Blockstream has released Elements v23.3.4 to fix the exploited weakness and has resumed block production and network transactions.
The company warned that it may pursue legal action if the remaining Bitcoin is not returned, but left open a path for the attackers to return the coins voluntarily without further escalation.