Key highlights:
- Liquid Network has restarted after the theft of nearly 4,000 BTC, with operations returning under heightened security measures
- Blockstream rejected ransom demands and said it will pursue legal and forensic avenues to recover the remaining stolen Bitcoin
- The self-proclaimed “white-hat” hackers have returned 3,400 BTC while holding onto the rest and seeking 10% as compensation
Nearly one week after “white-hat hackers” removed $320 million in Bitcoin from its coffers, Liquid Network has resumed block production. Blockstream, core technology provider for Liquid Network, has rejected demands to pay a ransom for the remaining stolen funds, branding the activity of the self-proclaimed “white-hat” hackers as theft.
Liquid restarts after $320 million exploit
Liquid Network
One week later, Liquid Network is taking a tentative approach to restarting after developers patched the vulnerability. SideSwap has confirmed that its markets have opened, but Bitcoin peg-ins and peg-outs remain closed while the Liquid Federation completes its security review.
“The Liquid Network has entered the next phase of its controlled resumption,” read an announcement. “As a precautionary measure, block production has resumed without transactions while the network is monitored to confirm full stabilization.
In the lead-up to the phased restart, Bitcoin OG Adam Back reaffirmed that the L-BTC:BTC 1:1 peg will be covered, urging users not to “panic sell” OTC.
Blockstream rejects ransom demand as hackers hold onto 600 BTC
The attackers originally described themselves as white-hat hackers and communicated with Blockstream through on-chain messages. They disclosed that they would return the stolen Bitcoin after the vulnerability was fixed, and Blockstream subsequently confirmed that the affected bridge nodes had been patched.
The attackers returned 3,400 BTC to the Liquid Federation, representing 85% of the funds taken. About 598.5 BTC, worth around $47 million at the time, remained outstanding, with the white-hat hackers seeking compensation in the form of a 10% bug bounty.
However, Blockstream has rejected any demand for payment in exchange for returning the remaining Bitcoin. The company rejected the characterization of the incident as responsible disclosure, arguing that taking assets without authorization and withholding them constitutes theft rather than white-hat activity.
Blockstream also warned that paying a ransom could create a bad precedent where developers of open-source Bitcoin infrastructure become financially responsible for attacks against the software they maintain. The company said it would pursue lawful avenues to recover the remaining Bitcoin, threatening to involve law enforcement agencies.
“To those holding the stolen Bitcoin, there is still an opportunity to resolve this responsibly. Bitcoin can be returned, and we can revert to the standard of white-hat principles.”
However, Blockstream’s stance has drawn fierce criticism from the ecosystem, with one X user branding their actions as “backstabbing the guy who gave them 3,400 BTC”.
Source:: Liquid Network Restarts, Blockstream Refuses to Pay Ransom for Stolen Bitcoin