Liquid sidechain pauses after 3,998 BTC withdrawn from federation wallet
Liquid sidechain halted
Blockstream’s Liquid sidechain stopped processing new transactions on Sunday after almost all of the bitcoin that backs the L‑BTC token was moved to a single address. The address’s owner posted an on‑chain message saying they were “whitehats” and asked to be contacted.
Key points
- Two transactions moved a total of 3,998.49748445 BTC (about $319 million) from the Liquid federation wallet.
- The destination address is bc1ql4mfu6aundtkksxklfajs2h3t9nzcd6gyqjlte.
- The sender added an OP_RETURN note: “we are whitehats. contact us on chain.”
- Liquid disabled its bridge nodes and asked exchanges to pause L‑BTC deposits and withdrawals.
- Blockstream replied with a 1,000‑satoshi transaction asking to contact [email protected].
Official statement
Liquid posted on Twitter at 4:25 p.m. ET that the funds were withdrawn using the SideSwap Peg‑out Authorization Key (PAK), but the key itself was not compromised. The network said bridge nodes were disabled and that other assets on Liquid, such as USDT and DePix, were unaffected.
What is confirmed
The two withdrawals were confirmed on the Bitcoin blockchain (block 965780 and a later block). The total amount left the federation wallet is now 197.47 BTC. The OP_RETURN message and the follow‑up 1,000‑satoshi transaction from Blockstream are visible on‑chain. The federation wallet uses an 11‑of‑15 multisignature script, and peg‑outs require a PAK list that takes three days to change.
What remains unclear
Liquid did not explain how the SideSwap PAK was used to move the funds without being compromised. The motives of the sender are unknown, and it is not clear whether the withdrawal was a test, a bug exploit, or a malicious act.
Why it matters
L‑BTC is a token that represents bitcoin on the Liquid sidechain. Users rely on the federation wallet to keep the peg between L‑BTC and real bitcoin. The pause stops new L‑BTC deposits and withdrawals, affecting traders and exchanges that use Liquid for fast settlement.
Next steps
Bridge nodes remain disabled while Blockstream investigates. Exchanges have been told to pause L‑BTC activity. The Liquid roadmap mentions a future “BitVM‑style 1‑of‑n bridge” that could reduce reliance on the current federation, but this design is not yet live.
