Blockstream's Liquid Network Drained by Alleged White-Hat Hackers

Blockstream's Liquid Network was drained of nearly $320 million worth of Bitcoin (BTC) after alleged white-hat hackers exploited a vulnerability in the network. The attackers left an on-chain message claiming they are 'white hackers' and requested that Blockstream fix the bug before returning the stolen funds.

The incident occurred when 4,000 BTC were withdrawn from the federation wallet backing Liquid Network's L-BTC (Liquid Bitcoin) through the SideSwap PAK (Peg-out Authorization Key). However, it was not the key itself that was compromised. The attackers then transferred the funds to a single address.

Ledger CTO Charles Guillemet and others have questioned the white-hat claims of the hackers, pointing out that they first moved hundreds of millions in collateral before announcing their intentions. Guillemet compared this approach to the Ronin bridge hack and Euler Finance attacker's later 'let's talk' negotiation.

Blockstream has halted the Liquid Network and notified exchanges, while also contacting the hackers on-chain. The incident highlights the importance of secure institutional crypto custody solutions for managing digital collateral.