The transaction pays 3,400 BTC back to the Liquid federation wallet and 598.50 BTC to the attacker’s own address. It is unconfirmed and flagged replaceable, and neither side has published anything about the split.
The address that emptied Blockstream’s Liquid federation wallet on Sunday has broadcast a transaction sending most of the bitcoin back, after a negotiation conducted entirely inside bitcoin transactions.
Blockstream has not said anything publicly since Liquid’s first statement on Sunday evening. Every message it has sent the attacker went into an OP_RETURN field, PGP-signed.
The transaction pays 3,400 BTC, worth about $268 million, to the federation address, and sends 598.49955894 BTC, about $47.2 million, back to the address that took it. That is 15% of the 3,998.50 BTC withdrawn. It carries a fee of 1,768 satoshis, a rate of 0.77 satoshis per virtual byte, and all 16 inputs are flagged for replace-by-fee, so it can be replaced with a different transaction while it waits. It was still unconfirmed at 15:50 UTC on Monday.
Is That Ok
Blockstream opened the channel at 19:31 UTC on Sunday with 1,000 satoshis and the text “Please contact security@blockstream.com.”
It sent two encrypted messages early Monday, at 01:33 and 01:49 UTC, the second labeled as Electrum BIE1 ECIES encrypted to the key behind the attacker’s address.
At 02:20 UTC the attacker answered in the clear, spending its entire balance to itself and writing: “sending most back to bc1qdlld6antmv4xug242ed83q7k4rqw50cwfns38szx4qu2f4jwaxxsuhwxxr, is that ok.”
Blockstream replied at 03:30 UTC with a PGP-signed “Yes, thank you.” At 11:46 UTC it sent a second signed message: “Bridge nodes are patched, safe to return the funds.” The 3,400 BTC transaction followed.
Nothing either side published onchain sets a figure for what the attacker keeps, or calls it a bounty. Two further encrypted messages are sitting unconfirmed in the mempool.
Bug In Elements
SideSwap, the Liquid Federation member whose peg-out authorization key was used, published the mechanism on Sunday at 21:19 UTC.
“Today at 14:05 UTC a customer sent 4,000 L-BTC to the SideSwap peg-out service,” it wrote. “Our service processed it like any other order: the L-BTC was burned on Liquid with a valid peg-out authorisation, and at 14:28 UTC the Liquid Federation paid 3,996 BTC to the customer’s Bitcoin address.”
SideSwap said Blockstream had since established that the L-BTC in that order “was created through a bug in the Elements software,” and that neither its key nor any of its systems were compromised. “Our service had no way to tell those coins from any other L-BTC.”
An earlier transaction at 14:01 UTC sent 2.5 BTC to the same address, before the order SideSwap describes. Together the two peg-outs came to 3,998.4975 BTC.
Peg Still Short
The federation wallet holds 197.47 BTC confirmed, and would hold 3,597.47 BTC if the return confirms. Outstanding L-BTC stands at 197.30 BTC by the explorer’s peg accounting — peg-ins of 18,356.93 BTC against peg-outs of 18,149.60 BTC and 10.03 BTC burned.
Bridge nodes are still disabled, on Liquid’s account, so no new transactions reach the network. Liquid has not posted since Sunday, the Liquid blog’s most recent entry is a July technical explainer, and neither Blockstream’s account nor that of chief executive Adam Back has mentioned the incident; both last posted on Sept. 4.
Bitcoin traded at $78,855, down 0.90% over 24 hours, per CoinGecko.
Anyone Can Write There
The attacker’s address has become a public message board. Wallet developers have paid to advertise there, one message thanks a bitcoin-buying site, another promotes a memecoin, and several carry unverified accusations naming Blockstream staff and Bitcoin developers. None of it is signed, and any address can write to another.
Blockstream’s messages are the exception. They are PGP-signed, which is what lets the attacker verify who is on the other end, and it is the only channel either party has used.
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