- Liquid Network incident attacker says most of the 4,000 BTC will return after every node receives the software patch.
- Blockstream sent a signed message stating bridge nodes were patched, while the bitcoin stayed in the receiving wallet.
- SideSwap says a valid peg-out burned 4,000 L-BTC and paid 3,996 BTC without compromising its authorization key.
Liquid Network incident negotiations advanced after the attacker offered to return most of the roughly 4,000 BTC. The coins were worth about $320 million when withdrawn.
Blockstream later sent a signed message stating that bridge nodes were patched. On-chain records still showed nearly 3,998.5 BTC in the receiving wallet.
Liquid Network Incident Moves Into Signed Onchain Negotiations
The attacker used Bitcoin OP_RETURN outputs and encrypted text to contact Blockstream. A message at block 965,875 requested a complete node patch first.
It instructed Blockstream to secure every node before any return transfer. Blockstream answered that its bridge nodes were patched and safe.
That response carried a PGP signature matching the security key published by Blockstream. Earlier communication began after Blockstream requested direct contact through an on-chain transaction.
Another attacker message offered to send most funds back to the federation address. It did not define the amount covered by “most.”
The exchange followed several messages recorded across Bitcoin blocks 965,822, 965,869 and 965,875. Each message advanced contact without transferring reserve funds.
The Liquid Network incident is unresolved until the bitcoin moves back on-chain. The receiving address held about 3,998.5 BTC during the latest review.
Several observers dispute the white-hat description. Ledger Chief Technology Officer Charles Guillemet said ethical researchers normally disclose flaws before moving user collateral.
Liquid Network Incident Traces to an Elements Software Bug
According to Charles Guillemet, SideSwap said one order transferred 4,000 L-BTC into its peg-out service. The service burned those tokens using a valid authorization.
Liquid Federation members then paid about 3,996 BTC to the customer address. SideSwap retained its stated 0.1% fee from the transaction.
Before the main withdrawal, three smaller peg-outs tested the route. Public records place the 3,996 BTC federation payment at block 965,783.
Blockstream later linked the L-BTC creation to an Elements software flaw, SideSwap said. SideSwap reported no breach of its systems or authorization key.
The Liquid Network incident reduced the federation wallet from roughly 4,205 BTC to about 203 BTC. Other issued assets were reported as unaffected.
Liquid paused network activity while operators applied patches. Bridge nodes, exchange deposits, withdrawals, swaps, peg-ins and peg-outs stayed unavailable pending a restart.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. CoinCryptoNewz is not responsible for any losses incurred. Readers should do their own research before making financial decisions.
