Nearly 4,000 BTC, worth roughly $319 million, moved out of Blockstream's Liquid Network federation wallet on Sunday, followed by an onchain message claiming the transfer was a whitehat action. Liquid's reserve fell from about 4,200 BTC to 207.275 BTC, and neither Blockstream, Liquid, nor Adam Back had addressed the incident as of roughly 3 p.m. EDT.
Liquid's Reserve Drops From 4,200 BTC to 207 BTC
Onchain researcher Ergo BTC flagged two linked bitcoin transactions, including a large Liquid peg-out described as roughly 4,000 BTC leaving a pool of about 4,200 BTC. A follow-up transaction spent approximately 3,998.5 BTC and carried the message: According to the onchain note: "we are whitehats. contact us on chain."
Blockstream's Liquid explorer subsequently showed federation holdings of just 207.275 BTC, a steep drop from the roughly 4,200 BTC that had backed the network for months. The move is drawing attention because Liquid's peg-out system is not designed to let anyone simply pull bitcoin from the sidechain. Normally, LBTC is destroyed on Liquid before federation functionaries process the corresponding bitcoin withdrawal.
Federation Multisig Setup Deepens the Mystery
Mainchain funds require an 11-of-15 federation multisignature, while the Peg-out Authorization Key system is intended to restrict payments to approved member wallets. How this happened remains a mystery.
Several explanations remain possible, including a compromised whitelisted wallet, abuse involving Liquid's security mechanisms, or a coordinated white-hat extraction meant to protect funds after a vulnerability was discovered. None has been confirmed, and treating the "whitehat" message as proof of good intentions would be jumping ahead of the evidence.
Bitcoin Remains Concentrated as Liquid Stays Silent
For now, the bitcoin is reportedly concentrated on the Bitcoin blockchain and had not obviously been mixed at the time of writing. The next significant development will be whether Blockstream or Liquid confirms an incident, explains why the reserve collapsed from roughly 4,200 BTC to 207 BTC, or responds through the onchain channel apparently opened by the unidentified party.
The cause of the transfer remains unconfirmed, and Blockstream, Liquid, and Adam Back had still not commented as of Sunday afternoon.
Source: Bitcoin News
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