Liquid sidechain attacker returns 3,400 BTC, keeps 598 BTC
Attacker returns most stolen BTC
The address that emptied Blockstream’s Liquid federation wallet on Sunday has broadcast a new transaction. It sends 3,400 BTC (about $268 million) back to the federation wallet and 598.49955894 BTC (about $47 million) to the attacker’s own address. The transaction is still unconfirmed and can be replaced with a higher‑fee version.
Key details
- 3,400 BTC returned to the federation wallet.
- 598.5 BTC kept by the attacker (≈15 % of the withdrawn amount).
- Transaction fee: 1,768 satoshis (0.77 sat/vbyte).
- All 16 inputs are marked replace‑by‑fee.
- Blockstream opened a communication channel at 19:31 UTC Sunday.
- Negotiations took place via encrypted and clear‑text Bitcoin messages on Monday.
- SideSwap identified a bug in the Elements software that created the L‑BTC used in the attack.
Negotiation via Bitcoin messages
Blockstream posted a message in the OP_RETURN field of the transaction asking to contact [email protected]. Early Monday it sent two encrypted messages (01:33 UTC and 01:49 UTC). The attacker replied at 02:20 UTC in clear text, asking “is that ok?” after sending the BTC back to its own address. Blockstream responded with a PGP‑signed “Yes, thank you.” at 03:30 UTC and later confirmed that bridge nodes were patched, after which the 3,400 BTC return transaction was broadcast.
Bug in Elements software
SideSwap, a member of the Liquid Federation, explained that the L‑BTC used in the attacker’s order was created by a bug in the Elements software. The bug allowed the L‑BTC to be minted without a proper peg‑out authorization, but SideSwap’s own keys and systems were not compromised.
Confirmed facts
- The return transaction exists on the Bitcoin mempool and contains the amounts shown above.
- Blockstream’s messages are PGP‑signed, confirming their authenticity.
- SideSwap’s post on Sunday 21:19 UTC describes the peg‑out process and the bug.
- The federation wallet currently holds 197.47 BTC confirmed; it would hold 3,597.47 BTC if the return confirms.
Open questions
- The exact reason the attacker kept 598 BTC has not been disclosed on‑chain.
- Whether the attacker will attempt another transaction after the return is unknown.
- Bridge nodes remain disabled, preventing new Liquid transactions.
Impact on the Liquid network
The incident shows that a bug in the Elements software can create unbacked L‑BTC, leading to large losses. Blockstream’s negotiation and partial return demonstrate a willingness to cooperate, but the network remains paused because bridge nodes are still offline.
Next steps
Blockstream has not issued a new public statement since the initial announcement. The return transaction is still awaiting confirmation. Until bridge nodes are repaired, no new transactions can be processed on Liquid.
