Blockstream Says Funds Can Be Returned After Liquid Network Hack

The Liquid Network, a Bitcoin sidechain operated by a federation of 81 members, was paused on Sunday after a hacker—self‑described as a “white hacker”—exploited a bug and withdrew approximately 4,000 BTC from the federation wallet.

Impact on L‑BTC Backing

L‑BTC, the network’s native token, is intended to be 1:1 backed by Bitcoin. After the theft only 197 BTC remained in the federation wallet, reducing the backing to about 4.7 % of the amount required for a full peg.

Attacker’s Offer to Return Funds

The attacker announced that they would return “the money back safely” once the vulnerability is fixed. Blockstream responded that bridge nodes have been patched and that it is safe for the funds to be returned, thanking the attacker for the offer.

Network Operations on Hold

All bridge nodes have been disabled, and exchanges have been asked to pause L‑BTC deposits and withdrawals. Other assets on the sidechain, such as USDT, remain locked as well. Services including Tetrapolar, Sideswap, Aqua Wallet, and Stokr confirmed that their users cannot move assets on Liquid at this time.

Federation Silence

Most federation members—including Bitfinex, Boltz, Hodl Hodl, Specter, Coinshares, Komainu, Xapo, Bull Bitcoin, and Ledger—have not issued public statements. Blockstream’s CEO Adam Back, who provides technical support to the network but is not a federation member, has also remained silent.

Uncertainty Over L‑BTC Value

With the peg severely under‑collateralized, the future trading value of L‑BTC is unclear. Analysts note that if the backing remains insufficient, L‑BTC could lose its limited‑supply characteristic, potentially leading to a devaluation when peg‑outs resume.

Open Questions

• Will the attacker return the full amount or only a portion?
• Who will absorb any shortfall if the peg cannot be restored?
• When will the Liquid Network resume normal operations?