4200 BTC.
Wake up and there are only 207 left.
95% of the reserves evaporated on a Sunday.
$320 million.
It wasn’t the exchange that was hacked.
It was the “vault” of the Bitcoin sidechain that got emptied.
Liquid Network.
Bitcoin sidechain built by Blockstream.
Adam Back’s company.
An early reader of Satoshi Nakamoto’s paper.
Liquid uses federated multi-signature custodianship for BTC and issues a pegged token, LBTC.
Signed jointly by 15 institutional members.
With just 11 signatures, you can move the vault.
This mechanism has been running for 7 years.
Nothing happened.
Until yesterday.
September 6, Sunday.
A peg-out transaction moved 4,019 BTC from the federated wallet.
Amount: $320 million.
An OP_RETURN message was embedded in the transaction:
“We are whitehats. Contact us on chain.”
We’re white hats. Contact us on-chain.
Blockstream replied with an address.
Left one line: “Please contact security@blockstream.com”
The hacker replied: “Please contact us on Signal @m671aw.70”
They were chatting in the clear on the Bitcoin blockchain.
A $320 million negotiation—written on the blockchain.
Anyone can see.
No one can change.
The technical details slowly came to light.
It’s suspected there’s an inflation vulnerability in the LBTC sidechain.
The hacker minted more than 4000 LBTC out of thin air—LBTC that didn’t exist.
Then used those LBTC to convert into real BTC via SideSwap’s peg-out authorization keys.
The 15-party federated HSM-secured server: because the transaction “looked legitimate,” all parties signed.
The 11/15 threshold is built on one premise: all LBTC are backed by real BTC.
Once that premise was gone,
11 got the keys and turned them into a rubber stamp.
Ledger’s CTO was the first to jump out and question it.
“The white-hat explanation is identical to the Ronin bridge hacker’s.”
In 2022, the Ronin was hacked for $620 million.
The hacker also claimed they were doing it for the right reasons, not for the money.
In the end, the money was never returned.
JAN3 CEO Samson Mow said the Liquid functionality in the Aqua wallet has been affected.
Exchanges were notified to suspend LBTC deposits and withdrawals.
The sidechain has been shut down.
People holding LBTC can only wait now.
Wait for the hacker and Blockstream to negotiate.
Wait to see whether the $320 million will come back.
You might ask: does this have anything to do with the Bitcoin mainnet?
No.
No blocks were missing on the BTC mainnet.
No transaction was altered.
#BTC $BTC
Wake up and there are only 207 left.
95% of the reserves evaporated on a Sunday.
$320 million.
It wasn’t the exchange that was hacked.
It was the “vault” of the Bitcoin sidechain that got emptied.
Liquid Network.
Bitcoin sidechain built by Blockstream.
Adam Back’s company.
An early reader of Satoshi Nakamoto’s paper.
Liquid uses federated multi-signature custodianship for BTC and issues a pegged token, LBTC.
Signed jointly by 15 institutional members.
With just 11 signatures, you can move the vault.
This mechanism has been running for 7 years.
Nothing happened.
Until yesterday.
September 6, Sunday.
A peg-out transaction moved 4,019 BTC from the federated wallet.
Amount: $320 million.
An OP_RETURN message was embedded in the transaction:
“We are whitehats. Contact us on chain.”
We’re white hats. Contact us on-chain.
Blockstream replied with an address.
Left one line: “Please contact security@blockstream.com”
The hacker replied: “Please contact us on Signal @m671aw.70”
They were chatting in the clear on the Bitcoin blockchain.
A $320 million negotiation—written on the blockchain.
Anyone can see.
No one can change.
The technical details slowly came to light.
It’s suspected there’s an inflation vulnerability in the LBTC sidechain.
The hacker minted more than 4000 LBTC out of thin air—LBTC that didn’t exist.
Then used those LBTC to convert into real BTC via SideSwap’s peg-out authorization keys.
The 15-party federated HSM-secured server: because the transaction “looked legitimate,” all parties signed.
The 11/15 threshold is built on one premise: all LBTC are backed by real BTC.
Once that premise was gone,
11 got the keys and turned them into a rubber stamp.
Ledger’s CTO was the first to jump out and question it.
“The white-hat explanation is identical to the Ronin bridge hacker’s.”
In 2022, the Ronin was hacked for $620 million.
The hacker also claimed they were doing it for the right reasons, not for the money.
In the end, the money was never returned.
JAN3 CEO Samson Mow said the Liquid functionality in the Aqua wallet has been affected.
Exchanges were notified to suspend LBTC deposits and withdrawals.
The sidechain has been shut down.
People holding LBTC can only wait now.
Wait for the hacker and Blockstream to negotiate.
Wait to see whether the $320 million will come back.
You might ask: does this have anything to do with the Bitcoin mainnet?
No.
No blocks were missing on the BTC mainnet.
No transaction was altered.
#BTC $BTC