Liquid Sidechain Paused After Massive Bitcoin Withdrawal

Blockstream's Liquid sidechain was paused on Sunday after almost its entire bitcoin reserve backing L-BTC was withdrawn to a single address. The recipient of the funds, who claimed to be 'whitehats', wrote 'we are whitehats' in an OP_RETURN field and sent 1,000 satoshis back to the federation wallet.

The withdrawal, worth around $320 million at bitcoin's price of $79,901, was made via a working authorization key rather than a stolen one. The peg wallet is an 11-of-15 multisig, but it appears that the PAK list, which is meant to constrain peg-outs, was bypassed.

Liquid said that bridge nodes were disabled and exchanges were told to pause L-BTC deposits and withdrawals. However, USDT, DePix, and other assets issued on Liquid are unaffected.