Blockstream Bug Opened Liquid Community to $16 Million Bitcoin Theft

By | June 30, 2020

Key Takeaways

  • A bug in Blockstream’s Liquid Community may have allowed staff to steal Bitcoin with minimal authorization
  • Blockstream has applied a workaround and is at the moment growing a everlasting resolution
  • No funds have truly been stolen throughout the 18 months that the account was compromised

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Blockstream’s Liquid Network contained a vulnerability till immediately that would have allowed thousands and thousands in BTC to get stolen. The bug was disclosed by James Prestwich, a Bitcoin developer and founding father of the crypto startup Summa One.

How the Bug Works

The safety vulnerability affected an important account on the Liquid Community because of inconsistent timelocks.

That inconsistency may have allowed staff to withdraw Bitcoin from by way of an emergency restoration course of that requires 2 of three keyholders to signal a transaction. This bug would bypass the right multisig course of, which requires 11 of 15 keyholders to signal a transaction.

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In line with Prestwitch, the weak account managed 870 BTC ($eight million) for over an hour this week. Nevertheless, the bug may have compromised thousands and thousands of {dollars} earlier than the final transaction: the potential exploit has existed for 18 months and affected greater than 2,000 UTXOs.

Blockstream’s Response

Blockstream CEO Adam Again has responded and admitted that the bug was a “identified difficulty.”

Again says {that a} full repair has been underway for a while, however has been delayed for a number of causes. He added that builders are at the moment working with the Liquid Federation to create and deploy a remaining patch. Proper now, a workaround is in place that can clear up the issue in a brief and restricted approach.

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Adam Again famous that Blockstream’s dealing with of the state of affairs “is lower than [its] standard commonplace of trust-minimization.” To Blockstream’s credit score, no funds have truly been stolen. Moreover, the bug solely opens the opportunity of inner theft by staff—not an out of doors assault.

Why Blockstream Is Controversial

Blockstream and the Liquid Community are considerably controversial among the many crypto neighborhood, particularly among the many Bitcoin neighborhood.

Whereas Blockstream funds improvement of Bitcoin itself, the corporate’s Liquid Community is a federated sidechain that shops BTC outdoors of the primary Bitcoin blockchain. That signifies that the corporate maintains important management over the funds of customers who belief it—sometimes enterprises and exchanges that depend on it for transfers and settlement.

Liquid’s bug is unlikely to have an effect on common crypto holders. Regardless, the information is a reminder that buyers who want to keep most management over their Bitcoin ought to accomplish that by holding it in their very own non-custodial wallet.

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