Blockstream launches switching service after Boltz suspended operations

Blockstream launches a beta version of Swaps, replacing Boltz's suspended service

Blockstream has now launched a beta version of Blockstream Swaps after unmanaged exchange service provider Boltz suspended its service due to months of automatic detection and multiple exploit attacks.

Core Points

Blockstream launched a beta version of Blockstream Swaps after Boltz suspended its switching services. Boltz blamed the suspension of his service on months of automated detection assisted by artificial intelligence and multiple exploit attacks. Blockstream said its exchange service is in development and will support asset transfers between Bitcoin, Lightning Network and Liquid Network. Boltz emphasized that due to the self-managed architecture, user funds are always safe.

Blockstream stated in an announcement released on August 10 that the internal service has been tested for specific participants. The development process accelerated after Boltz stopped processing switching services on August 3. The Bitcoin infrastructure company said the product was in development before Boltz shut down and is designed to provide users with more options for transferring funds between Bitcoin, Lightning Network and Liquid Network.

Boltz said its service suspension stems from the continued increase in automation, AI-assisted detection activities targeting its infrastructure, and multiple exploit incidents that the team has brought under control. The company kept the swap service offline because attackers were iterating faster than its developers could identify and patch vulnerabilities.

"Attackers are now iterating faster than a team of our size can discover and patch vulnerabilities," Boltz said in a statement quoted by Blockstream. The exchange service provider stated that due to the self-managed architecture, customer funds were never at risk. The refund mechanism is still available while normal exchange operations are closed.

As reported on August 4, Boltz initially restricted swaps involving assets such as USDT, USDC, WBTC, TBTC and RBTC after discovering a vulnerability in its Ethereum virtual machine integration on August 1. At the time, exchanges between Bitcoin, Lightning Network and Liquid Network could still take place, but the company suspended all exchange services two days later.

Blockstream Swaps enters testing after Boltz shut down

Blockstream describes the new service as an internal switching function built for Lightning Network and Liquid Network, and organizations can now apply to join the testing program. According to the company, development of the product was in the "deep" testing phase before Boltz suspended service. Blockstream said recent events have strengthened its decision to accelerate the launch, while emphasizing that the product is not intended to replace existing service providers.

"We have no intention of replacing any service provider," Blockstream said."We believe Blockstream Swaps is a much-needed addition designed to increase the redundancy and resilience of the ecosystem." Boltz has previously worked with Blockstream and other Bitcoin apps that rely on their infrastructure to transfer assets between the Bitcoin Main Network, Lightning Network and Liquid Network. According to earlier reports, its shutdown on August 3 also affected services such as Bull Bitcoin, Aqua and ZEUS that rely on the service provider's exchange infrastructure.

For Blockstream, launching its own implementation adds another exchange service provider to its ecosystem, and users do not need to entrust Bitcoin to intermediaries during the transaction process. The company said that Blockstream Swaps can support users who hold BTC on the Bitcoin main network or LBTC on the Liquid network to interact with the Lightning network without directly managing the Lightning network channel.

Atomic Exchange: Enabling users to transfer Bitcoin between different networks

On a technical level, Blockstream explains that atomic exchange allows two parties to exchange assets without relying on a trusted intermediary to custody the assets of both parties. The structure of the transaction ensures that either both parties complete the transfer or neither. If the exchange cannot be completed under specified conditions, the funds can still be recovered by their original owners.

Boltz adopts an architecture based on hashed time-locked contracts. According to Blockstream, one party generates a secret and issues its cryptographic hash, and both parties in the exchange lock payments under the same conditions. The secret is revealed in order to obtain payment from one party, and another convenience can use it to complete the corresponding transaction. Timelock provides a refund path if the exchange is not completed within the specified period.

According to Blockstream, Boltz later incorporated Taproot and MuSig2 into the architecture, allowing cooperative transactions to be settled through the regular key path, while retaining the script path as an alternative. Different trading directions also use different exchange types. Submarine swaps transfer BTC or LBTC to the Lightning Network, while reverse submarine swaps transfer Lightning Network funds back to the Bitcoin Main Network or Liquid Network. Chain swaps allow BTC and LBTC to exchange without a managed intermediary.

Atomic swaps have been part of Bitcoin development for years. Blockstream has previously launched the Liquid network as a sidechain for Bitcoin, introducing L-BTC, an asset anchored to Bitcoin, aiming to enable faster transfers and other functions outside the main chain. Blockstream has also developed LiquiDEX, a separate exchange protocol for exchanging two assets issued on the Liquid network in a single transaction. According to the company, LiquiDEX does not require the same hash lock and time lock structures used in HTLC-based exchanges. Instead, market makers sign inputs using SIGHASH_SINGLE and SIGHASH_ANYONECANPAY, allowing the buyer to add inputs and outputs without invalidating the market maker's signature. Blockstream said the protocol is already used by platforms such as SideSwap to support point-to-point over-the-counter trading and order books without trust.

Blockstream Swaps is designed to address the complexity of Lightning network channels

Lightning network users often need to have channels with sufficient liquidity to send or receive payments. Running the Lightning Network directly may require users or service providers to run nodes, open channels, invest money, and gain inbound liquidity. Blockstream said its exchange model is designed to process conversions at the time of payment, allowing users to retain BTC or LBTC and redeem it for the required Lightning Internet payment during the transaction process.

According to an example given by the company, users can use balances they already hold on the Bitcoin main network or the Liquid network to pay Lightning network invoices without first opening and injecting a Lightning network channel. Incoming Lightning Internet payments can also be converted to LBTC. Blockstream said its wallet settings allow incoming Lightning network transactions to be settled in the form of LBTC into wallets protected by Jade hardware devices, while Jade remains offline during collection. According to the company, merchants can also accept Lightning online payments and settle funds on their preferred supported networks.

Blockstream's own product line already covers the three networks involved in this switching service. Its current wallets support on-chain Bitcoin, Lightning Network and Liquid Network, while the company also developed Core Lightning and operates the Liquid Network. Boltz, meanwhile, has not announced a specific date for resuming its exchange services. Its August 3 notice stated that the API will remain available to support cooperative refunds, while unilateral refunds will continue to operate without relying on Boltz's infrastructure. Support services are also provided as usual while the team evaluates the attack and subsequent steps.