The Liquid Network, a layer-two Bitcoin sidechain, was paused following an exploit involving Blockstream’s Elements software. Approximately 4,000 BTC, valued at roughly $320 million, was withdrawn from the network.
Onchain analyst Ergo BTC first flagged the incident, prompting alerts across social media. Blockstream later confirmed that the funds had been removed and stated that the actions were carried out by individuals described as white hat hackers. In response to the event, Blockstream paused the network and instructed exchanges to halt L-BTC deposits and withdrawals.
According to Sideswap, an atomic-swap marketplace associated with Blockstream, a customer sent 4,000 L-BTC to its peg-out service. The service processed the order, burning the L-BTC on Liquid and having the Liquid Federation pay out 3,996 BTC to a Bitcoin address. Blockstream subsequently determined that the L-BTC involved in the order was generated due to a bug in the Elements software.
Blockstream initiated efforts to contact the individuals involved, sending an onchain message directing them to a security email address. Ledger CTO Charles Guillemet commented on the nature of the outreach, noting that the situation diverges from typical responsible disclosure practices, though communications requesting contact via Signal were established.
The incident also impacted related applications. Samson Mow, CEO of bitcoin technology firm JAN3, confirmed that the Aqua Wallet was affected due to its reliance on Liquid functionality, though standard Bitcoin transactions remained operational. Developers continue to investigate the node-level issue as the network remains paused pending resolution.
