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Following
BTC Blockstream refused to pay ransom, characterizing the theft of the Liquid network as "theft"
Blockstream has explicitly refused to pay money to recover the remaining US$47 million in Bitcoin from the Liquid network and terminated days of negotiations with ransom claimants. The company issued a statement on Friday, saying: "Unauthorized transfer of assets and withholding them for return is a criminal act and not a responsible security disclosure." This is not a white hat act, it is theft."
Details of capital flows and technical vulnerabilities
On Sunday, about 4,000 bitcoins were diverted from the sidechain, valued at about US$320 million at the time. The attacker returned 3,400 bitcoins on Monday, leaving 598.5 bitcoins still at his withdrawal address and have not been moved again.
This incident originated from a flaw in the Liquid node's cache range proof verification. The attacker used the vulnerability to minted unsecured L-BTC and exchanged it for reserve bitcoins through Alliance member SideSwap, who held the bridging authorization key, reducing the reserve to 197 BTC. Blockstream patched the bridge node in ten hours and released Elements v23.3.4 on Wednesday. Liquid Network resumed withdrawal and transaction processing on Thursday, but due to caution, the bridge withdrawal feature was temporarily disabled to allow for "final recovery work." In addition, the company also separately warned the public to be wary of false update website fraud against node operators.
Position clarification: negotiation does not mean recognition
Liquid's incident report released on Tuesday took on a different tone, claiming it was coordinating with "white-hat hackers" to restart the network. In response, Blockstream emphasized that its participation in negotiations "should not be misinterpreted as recognition of actions taken or terms proposed." These terms have previously been made public.
In a Bitcoin transaction on Wednesday, attackers pointed out that Blockstream had allocated only "only $1.5 million (possibly even zero)" to protect $5 billion worth of assets, accusing it of a "blatant disregard for security." They require that the company's own funds be used as a loophole bounty payment of 10%, otherwise all holders will suffer a 15% loss due to their irresponsibility and stinginess.
Resolutely resists extortion precedents
Blockstream said it would not be a party to setting a precedent where "projects developed by open source software developers to benefit the Bitcoin community are forced to pay ransoms that far exceed their financial benefits." At the same time, the company will not make up for the funding gap of users. "Bitcoin is hard currency and cannot be minted without incurring costs," the company pointed out."Bitcoin will not pay ransoms by imposing 'interest rates' on users."
If the funds are not returned, the company will seek help from law enforcement, exchanges and forensic experts to use "all legal means" to recover the losses. "Transaction records will not disappear, and the evidence they leave will not be erased," the company warned at the end of its statement. Finally, Blockstream reiterated: "Please return the Bitcoin."
