Blockstream refuses $50 million bounty demand from Liquid attacker

Blockstream announced it will not pay the roughly 600 BTC (about $50 million) bounty demanded by the attacker who exploited the Liquid sidechain on September 6. The attacker had returned 3,400 BTC after Blockstream patched the vulnerability, then asked for a 10 % reward from Blockstream’s own funds.

Background of the exploit

The exploit allowed the creation of approximately 4,000 unbacked L‑BTC, which were converted to about 3,996 BTC via the SideSwap peg‑out service. After Blockstream fixed the affected nodes, the attacker sent back 3,400 BTC, representing roughly 85 % of the haul.

Blockstream’s response

On September 11 Blockstream rejected the bounty demand, stating it would pursue the remaining funds through law enforcement, exchanges, service providers and forensic specialists if they are not voluntarily returned. The company emphasized that paying such a demand would set a precedent that could incentivize future attackers to demand compensation for partial restitution.

Industry reaction

Commentators noted that Blockstream’s situation is unusual, as most hacked protocols never see any return of stolen assets. Some argue that refusing the bounty may strengthen deterrence, while others warn it could discourage future attackers from returning any portion of stolen funds.

Impact on Liquid

After the partial return, the Liquid federation reserve covered about 85 % of its L‑BTC supply. Block production has resumed, but peg‑in and peg‑out services remain disabled while a security review is completed. SideSwap has pledged to keep its peg service offline until a new security architecture is in place.

Future outlook

The remaining 598‑600 BTC remain unspent, potentially keeping pressure on the Liquid network. Blockstream’s chief executive, Adam Back, said the L‑BTC‑to‑BTC peg will ultimately be restored one‑for‑one and urged holders not to sell at a discount. The company has not disclosed how it will finance the shortfall if the attacker does not return the remaining coins.