Key facts
- Blockstream's Liquid Network has halted operations following a withdrawal of approximately 4,000 BTC.
- The withdrawn Bitcoin is valued at nearly $320 million.
- The withdrawal occurred via the SideSwap Peg-out Authorization Key, with a bug in Elements cited as the cause.
- The actors responsible claim to be white-hat hackers and have left on-chain messages demanding a bug fix.
- Liquid Network's reserves were significantly depleted, with only about 200 BTC remaining.
- Industry figures have questioned the white-hat claims, suggesting theft or leverage.
Blockstream's Bitcoin layer-2 Liquid Network has halted operations after approximately 4,000 BTC, valued at nearly $320 million, was withdrawn from its federation wallet. The incident, which occurred on Sunday, September 6, 2026, drained nearly all of the network's bitcoin reserves, leaving just over 200 BTC. The actors responsible have claimed to be white-hat hackers and have left on-chain messages indicating a desire to return the funds after a bug is fixed.
Liquid Network stated that the funds were withdrawn via the SideSwap Peg-out Authorization Key, but asserted that the key itself was not compromised. In response to the event, the network has paused operations and notified exchanges, with Blockstream attempting to contact the hackers. However, several industry figures, including Ledger CTO Charles Guillemet, have expressed skepticism about the white-hat claims, suggesting the actions resemble theft or leverage tactics rather than responsible disclosure.
The security breach on the prominent sidechain raises questions about the trust model of federated systems and their reliance on functionaries for asset management. The future of L-BTC's peg and the recovery of the drained funds remain uncertain pending further communication and resolution between Blockstream and the alleged hackers.