$320M Hack of Liquid Network via SideSwap.io Never a dull day in Bitcoin. UPDATE The purported white-hat hacker communicated with Blockstream through Bitcoin OP_RETURN messages and PGP-encrypted text. In a message at block 965,875, the party told Blockstream to “fix the bug first” and ensure every node is patched before transferring the funds back. Adam Back-led Blockstream subsequently sent a PGP-signed onchain message saying, “Bridge nodes are patched, safe to return the funds.” The signature verifies against the security key published on Blockstream’s website. The roughly 4,000 BTC remained in the attacker’s wallet at the time of publication. The exchange followed an earlier message from the attacker offering to send most of the bitcoin back to the federation address. Blockstream had first contacted the party through a transaction at block 965,822, asking it to contact the company’s security team. Communication between the parties began after Liquid said on Sept. 6 that roughly 4,000 BTC, then worth about $320 million, had been withdrawn from its federation wallet. The funds were withdrawn through the SideSwap Peg-out Authorization Key, but that key itself was not compromised, according to the network. In a statement on X, SideSwap said the affected transaction involved 4,000 L-BTC sent to its peg-out service. The service burned the tokens using a valid peg-out authorization, after which the Liquid Federation paid 3,996 BTC to the customer’s Bitcoin address. Blockstream later established that the L-BTC had been created through a bug in the Elements software, according to SideSwap. The trading platform said neither its systems nor its peg-out authorization key had been compromised. Meanwhile, Liquid has paused network activity, with bridge nodes disabled and LBTC deposits and withdrawals suspended at exchanges. SideSwap said swaps, peg-ins, and peg-outs remain paused until the network resumes. -- UPDATE Blockstream ”paused” the Liquid Bitcoin network. Turned off. That’s a big difference between Bitcoin and Liquid Bitcoin The discussion between @Blockstream and the white-hat hacker (WHH) regarding the ~4000 BTC from @Liquid_BTC is happening in public. It seems to be their preference over email. As it's hard to follow the chain of messages in OP_RETURN, here's a summary with links. 11:30 AM PDT - WHH: "we are whitehats. contact us on chain" mempool.space/tx/c103de95817… 12:31 PM PDT - Blockstream: "Please contact security@Blockstream.com" mempool.space/tx/91271efcbb5… 6:49 PM PDT - Blockstream: [encrypted to hacker's key, PGP-signed by security@Blockstream.com] mempool.space/tx/bd81219691e… 7:20 PM PDT - WHH: "sending most back to bc1qdlld6antmv4xug242ed83q7k4rqw50cwfns38szx4qu2f4jwaxxsuhwxxr, is that ok" mempool.space/tx/3a3eac4a263… 8:27 PM PDT - WHH: "Please fix the bug first. The chain is under risk at latest commit right now. Make sure every node is patched. Then we will transfer the money back safely after confirming the fix." [+ PGP-encrypted details to Blockstream] mempool.space/tx/83825b2135d… 8:30 PM PDT - Blockstream: "Yes, thank you." (PGP-signed; answers the 7:20 question, not the 8:27 one — confirmed in the same block) mempool.space/tx/8a444eed65c… Status as of 9:12 PM PDT: ~3,998.5 BTC still unmoved, no further messages from either side. Hacker address: mempool.space/address/bc1ql4… — On September 6, 2026, approximately 3,996 BTC (~$320 million) was withdrawn from the Liquid Network’s federation reserves in a single transaction, draining roughly 95% of the network’s Bitcoin backing. The actors left an on-chain message claiming to be “whitehats.” September 6, 2026, around 1406–1428 UTC Amount ~3,996 BTC (~$319–320M), leaving only ~207 BTC in reserve Mechanism Executed via SideSwap’s Peg-out Authorization Key (PAK) Key Compromised? No. Liquid explicitly stated neither the SideSwap PAK nor any other keys were compromised On-chain message "we are whitehats. contact us on chain" embedded in an OP_RETURN output Network status Liquid paused — bridge nodes disabled, no new transactions being submitted L-BTC backing A matching amount of L-BTC was burned in the same operation, so remaining circulating L-BTC remains ~11 backed by the reduced reserve How It Happened (What We Know) Liquid Network operates on a Strong Federation model 15 functionary members collectively control the Bitcoin reserves via an 11-of-15 multisig. To withdraw BTC back to the mainchain, a Peg-out Authorization Key (PAK) is required. PAKs are designed as a safeguard so that even if functionaries are compromised, funds can only go to pre-approved (whitelisted) addresses. The critical mystery the SideSwap PAK was used legitimately (not stolen), yet the funds went to a brand-new, non-whitelisted address. This suggests the failure was not a stolen key, but rather a breakdown elsewhere in the operational or authorization chain — possibly insider action, a compromised functionary process, or a flaw in how the PAK was configured or approved. Blockstream has not yet explained how a valid PAK directed funds to an unapproved destination. The “White Hat” Claim The actors sent 0.00001 BTC back to Liquid’s own address and asked to be contacted on-chain. Blockstream has responded with signed on-chain messages attempting to open communication, but as of now, the white-hat claim is unverified and the bulk of the funds (~3,998 BTC) have not moved since. Industry security figures are skeptical. Ledger CTO Charles Guillemet noted that genuine white-hat hackers do not typically drain 95% of a bridge’s reserves while soliciting contact — a pattern more consistent with theft framed retroactively as a security demonstration. Current Impact Exchanges have halted L-BTC deposits and withdrawals. Other Liquid assets (USDT, DePix, real-world assets) were not affected. Users cannot currently transact on the Liquid sidechain until federation members resolve the incident and restore operations. Bottom line The $320M withdrawal is confirmed. Whether this is a genuine white-hat rescue, an insider exploit, or a social-engineering attack on the federation’s operational controls remains unresolved. The funds are sitting visible on-chain, but have not been returned. Will this be the final straw in Blockstream the company? Only time will tell, but I expect more scandals to come.

Following the #Coldcard hacking incident, there an seems to be more interest in Block’s Bitkey, a collaborative custody solution to hold #Bitcoin. BitKey is an innovative product that helps noobs buy and hold Bitcoin in a collaborative custody model. A couple of points: - Citadelvault can extend the life of the BitKey by backing up its Emergency Exit Kit and store it up to 1,000 years. The Bitkey’s expected life cycle is between 8-10 years. - The Bitkey has a few weaknesses including users still need a working BitKey hardware wallet to recover funds. It also doesn’t handle legal title of Bitcoin or other digital assets We believe it’s better to use a full self custody solution using standards-based hardware wallets, together with a proper backup and inheritance solution using #citadelvault But for some people not confident with learning self custody and the responsibilities it entails, #Bitkey can be a solid choice for holding real Bitcoin! 🛡️🛡️🛡️

We built this Coldcard Vulnerability Risk Score calculator for Coldcard users to estimate how safe their Bitcoin wallets are https://www.citadelvault.org/security/ Works with single sig and multisig configurations No information is collected Stay safe! #coldcard #coinkite #help #hack

Citadel Vault Project Update 🛡️ Bill of Materials finalized ⚡️⚡️ On the project development front, we are making steady progress. The hardware Bill of Materials has officially passed its final review. From NFC to a contact Smartcard reader As part of this finalization, we decided to change the Vault Card reader from an external NFC reader to a contact Smartcard reader. Both hardware modules are manufactured by ACS and utilize the exact same driver. This ensures the Vault OS maintains full backward compatibility with the previously issued NFC readers. The new Smartcard reader provides a smoother and more foolproof user experience. It physically shrinks the security attack surface by completely eliminating wireless NFC communication. The device itself is also physically smaller. Both reader types operate exactly as intended, and you can simply unplug them the moment user authentication is complete using your 2 of 3 or 3 of 5 Vault Cards to unlock the Vault. #citadelvault #inheritance #security #generationalwealth

Citadel Vault Pro Expansion board

Production update ⚡ The Citadel Vault Core and Pro expansion boards are through final files and entering production. Core adds NFC smartcard reading, barcode scanning, printing, and a second Vault Drive. Pro builds on that with the 1,000-year archival disc, so your keys can outlive you by generations. Fully air-gapped. Built inheritance-first, so your heirs can recover decades from now with no cloud and no trusted third party. More soon. 🧡 #Bitcoin #selfcustody #inheritance #citadelvault

Thanks @sebrock for the kind words! #citadelvault #btcprague #inheritancecomputer View quoted note →

We couldn't have said it any better ourselves! Read for yourself from someone who has experienced a Citadel Vault first hand. (Thanks a million for the kind words, Sebrock!) Wow! I had it 1 my hands. 1 am seeking for an adequate adjective to describe this piece of hardware. Solid, beautiful, timeless. It looks and Feels like a million bucks, errr Bitcoin. And then it has functionality, which is crucial to safeguard our generational wealth. A lot of though and tech went into this. Kudos. #citadelvault www.citadelvault.org

@citadelvault Prague HQ after Day 1. Great to be around fellow Bitcoiners, thanks for all the kind feedback and interest in the Citadel Vault!!

Join PaulaBTCEdge hosting Self Custody and Inheritance panel about fears around self custody, complexity, self sovereignty running a node, inheritance and more. Friday June 12th at 12:40pm. #BTCPrague #BTCEdge #citadelvault What else needs to be included in this discussion? @ProofOfMoney @BTC Prague with @jimmysong Craig Nilsson @Alekqs_ and @Trezor

A 15-year-old Casascius coin was just redeemed, unlocking 25 BTC now worth ~$1.78M. In 2011, it held less than $100. Early Bitcoin security was simple: a private key under a hologram. It worked—but only once. Redemption destroys the vault. As more of these coins are opened, the real question becomes clear: how do you secure Bitcoin across decades, inheritance, and failure modes without one-time mechanisms? That’s the gap we’ve built into the Citadel Vault, the world’s first inheritance computer. An air-gapped system for serious Bitcoin holders—backing up hardware wallets, extending their lifespan toward a 1,000-year horizon, and guiding heirs through recovery with no custodians, KYC, or third-party risk. https://www.citadelvault.org

Citadel Vault Pro, housed in a tactical grey case and running air-gapped Vault OS with the Guardian inheritance app. Sovereign inheritance for your generational wealth. Launching at BTC Prague June 11th 2026. The world’s first Inheritance Computer. #Inheritance #Bitcoin

CAUSE OF DEATH: Unknown VICTIM: Every attack vector we could name Remote code execution. ✗ Blocked at Layer 1 — no network chip exists. Persistent malware. ✗ Blocked at Layer 2 — root is read-only. Memory corruption. ✗ Blocked at Layer 3 — Rust eliminated the category. GPU brute force. ✗ Blocked at Layer 4 — 65 MB RAM per guess. Single-point coercion. ✗ Blocked at Layer 5 — impossible below threshold. Vendor shutdown. ✗ Blocked at Layer 6 — the spec is public. We don’t have to survive. This is what six independent layers of security looks like. Each one stops something different. None of them depend on the others. Full post-mortem: https://citadelvault.org/sv/SecurityStack_6Layer_2026-05-11.html

Don't be a cautionary tale. https://citadelvault.org/sv/CautionaryTales_Loop_2026-05-11.html

Six layers between your Bitcoin and everyone who wants it. One of them is physics. One of them is math that doesn’t care who you are. One of them requires a quorum that can’t be coerced alone. Full breakdown of the CitadelVault security stack: https://citadelvault.org/sv/SecurityStack_6Layer_2026-05-11.html

Claude Didn’t Hack Bitcoin. It Solved a Recovery Problem. A viral story claimed Claude AI “recovered” nearly $400,000 in Bitcoin from a wallet that had been inaccessible for more than 11 years, but the reality is much more mundane and much more interesting for anyone thinking seriously about custody and recovery. Claude did not break Bitcoin’s cryptography; it helped reconstruct the correct recovery path from messy historical data. What happened The owner, posting as @cprkrn, had a legacy Bitcoin wallet dating back to around 2015. At some point he changed the wallet password, then forgot the new one. The coins were still on-chain, and the private keys were still inside wallet.dat, but he could no longer decrypt the file. Over the years he tried the usual approaches—password guessing, commercial recovery services, and tools like btcrecover—without success. As a last-ditch effort, he dumped an old college computer’s contents into Claude: files, backups, notes, password fragments, everything. Claude sifted through this unstructured data and surfaced an older wallet.dat backup that predated the password change. The user had also recently rediscovered a mnemonic or phrase that seemed related to the wallet but did not work against the current file. The key insight was that the phrase likely matched the older backup rather than the newer, re-encrypted wallet. What Claude did technically The technically interesting part is what Claude did with the artifacts, not with the Bitcoin protocol. First, it acted as a forensic search engine over the user’s digital history. Instead of brute forcing any secrets, it located an older copy of the wallet whose encryption state still matched the earlier password or mnemonic. That alone drastically reduced complexity: the “correct” wallet and “correct” secret actually existed; they just no longer matched the wallet the user kept trying to open. Second, it helped reconstruct which secret belonged to which wallet state. Human memory had collapsed multiple timelines—original wallet, password change, later usage—into a single fuzzy story. Claude re-expanded that into “this mnemonic likely goes with this older backup,” which is a pattern-matching problem, not a cryptographic one. Third, it debugged the recovery tooling. In the user’s account, btcrecover was mishandling the combination of shared key material and password when deriving the decryption key. A small implementation detail—concatenation order—meant that even with the right password, the derived key was wrong and decryption failed. Claude inspected the logic, corrected the order, and once that was fixed the decryption worked and private keys were exported (e.g., in WIF). So the actual sequence was: Find the right legacy wallet file. Associate the right previously-known phrase with that file. Fix the decryption path in the recovery tool. Decrypt and extract keys. At no point did Claude brute force a high-entropy passphrase or guess a BIP39 seed in any meaningful keyspace. What this was not It was not: Brute forcing a password over a large keyspace. Cracking a master seed phrase. Exploiting a flaw in Bitcoin’s cryptography or wallet encryption primitives. If this had been brute force in the strong sense, the story would look completely different: you would see talk of GPU clusters, constrained candidate sets, and hard tradeoffs around entropy and search space. Instead, everything hinges on prior possession of: The relevant secrets (mnemonic, password-like phrase). The relevant artifacts (older wallet.dat backup). A buggy recovery stack. Claude’s role was to reduce entropy by using context, not by applying extreme compute to an infeasible search space. Why Citadel Vault would have prevented this This is exactly the type of failure Citadel Vault is designed to eliminate: not cryptographic failure, but recovery-design and human-operations failure. In this case, the user had: Multiple wallet versions across time. Multiple related secrets. No clean mapping between “this secret unlocks this state of this wallet.” Citadel Vault’s model is to remove that ambiguity up front. During setup, it automatically imports and organizes wallet metadata and seed secrets in a structured way instead of relying on ad hoc files, notes, and remembered passwords. The user does not have to manually remember which phrase goes with which wallet file years later. Those imported secrets are then encrypted using standard, well-audited cryptography and split using a 2-of-3 Shamir scheme across smartcards, each with its own secure element. No single card ever holds the full key, and the mapping between “this set of cards” and “this encrypted secret for this wallet” is defined by the system from day one. The net effect: No password drift across different wallet versions. No ghost backups whose relationship to current state is unclear. No guessing which phrase applies to which file a decade later. Recovery becomes a deterministic process: present the required quorum of cards, follow a defined flow, and the system reconstructs the necessary secret for the correct wallet state. There is no need for AI-driven digital archaeology, because the recovery graph is explicit and preserved rather than reverse-engineered later from digital rubble. Why this story matters The Claude story is a useful reminder that most “lost Bitcoin” is not protected by unbreakable math alone; it is also hidden behind human and operational complexity. AI is now good enough to help unwind that complexity when users are lucky enough to still have the right shards of history lying around. But from a custody and inheritance perspective, depending on that kind of luck is itself a failure mode. A well-designed vault solution makes those relationships—between artifacts, secrets, and recovery paths—stable, explicit, and testable long before anyone needs to recover funds.

What if you could create a Bitcoin inheritance plan that didn’t expose your private keys… but still guaranteed your family could one day spend your sats? The quiet Bitcoin inheritance crisis Every Bitcoiner knows the mantra: “Not your keys, not your coins.” But inheritance creates a brutal paradox. If you never tell anyone how to reach your Bitcoin, it disappears when you do. If you do tell someone — a lawyer, a family member, a custodian — you’ve created a target that exists for decades before it’s ever needed. Billions in Bitcoin are already presumed lost forever, not because of carelessness, but because self-custody was never designed to survive the keyholder. Most current “solutions” are just variations on the same broken idea: • Write your seed phrase on paper and hope your heirs find it (but attackers don’t). • Put instructions in a will and trust your lawyer and the state with knowledge that you hold Bitcoin. • Use a managed custody platform that charges a yearly subscription — for the rest of your life — and assumes the company will still exist, still cooperate, and still be solvent when your family needs access most, potentially decades later. Your full balance and transaction history sits on their servers, visible to their staff, exposed to hackers, and accessible to any government that asks. • Rely on collaborative custody with a single commercial partner who holds a key and all your transaction history — a permanent privacy liability attached to your most sensitive financial data, with no guarantee they survive long enough to matter. All of these approaches either expose your keys and financial data too early, or chain your family’s future to a company that Bitcoin was designed to make unnecessary. Self-custody culture has unintentionally created an inheritance time bomb: as more people hold meaningful amounts of BTC, more families risk losing everything because the one person who understood the setup is gone. Rethinking Bitcoin inheritance: access, not secrets A sane Bitcoin inheritance plan should start from two simple principles: 1. Your heirs must be able to access funds after you’re gone. 2. Nobody should be able to front-run you, coerce you, or steal from you while you’re alive. That means: • No seed phrases sitting in a lawyer’s file cabinet. • No “dead man’s switch” that can be tricked by a missed email or a change to the Bitcoin protocol. • No dependency on a company’s servers being online, solvent, and cooperative — in 2026 and in 2046 — while they quietly accumulate your balance history, transaction graph, and identity data the entire time. • Every piece of your inheritance plan — Bitcoin private keys, legal documents, digital asset credentials — must remain offline and encrypted at all times. The moment that data touches a connected server, it becomes a target. Permanently. Modern vault design shows a better path: split control among multiple parties, enforce time delays, and make every inheritance flow an explicit protocol — not an informal set of instructions. You don’t give anyone the secret. You give them a way to jointly unlock what you’ve secured when the right conditions are met. How a Citadel Vault–style inheritance flow could work Imagine your Citadel Vault is built on a multi-key, multi-party foundation where no single person ever holds unilateral access. Your inheritance flow might look like this: 1. You set the rules — who inherits, what share they receive, and how many Vault Cards must be present to unlock the vault. You align this with your legal estate plan so on-chain reality matches your will. 2. You keep full control while alive — your Vault grows with you. As your wallet configuration changes, it adapts. As you add additional digital assets — like 2-factor authentication keys, encryption keys to drives, or power of attorney — the Vault will automatically encrypt, store, inventory, and track backups. A built-in veto window lets you stop any premature claim instantly. 3. When you’re gone, your heirs trigger inheritance — through a guided process, presenting agreed conditions. When the minimum threshold of Vault Cards is verified, the built-in Vault Advisor guides your heirs through a Recovery Ceremony — a structured, step-by-step process that confirms each card and unlocks the vault. No single card is enough. No company can intervene or override the process. 4. Time locks prevent abuse — an optional offline time lock delay ensures no one can rush an inheritance claim under duress or deception. A fail-safe override path remains available if you are alive but unreachable. 5. The vault transitions — without exposing keys — control moves to your heirs using the same cryptographic structure that protected it while you were alive. No lawyer, no custodian, and not even the vault provider ever saw your private keys, your balance, or your transaction history. Why this matters for sovereign families Bitcoin is generational money. If your inheritance plan is weaker than your self-custody, your setup is incomplete. A vault-based inheritance design: • Keeps you in full control while you’re alive, with no third party holding a key, a copy of your balance, or leverage over your plan. • No recurring subscription fees owed to a company that may not exist when your family needs it. • Gives your non-technical heirs a guided, repeatable process instead of a pile of opaque instructions they are too afraid to execute. Most importantly, it turns your Bitcoin from something only you can use into a durable, family-level asset that can safely outlive you — without trusting anyone you didn’t choose, on terms that never expire. If your current plan is a metal plate in a drawer and a hope that “they’ll figure it out,” your inheritance strategy is unfinished. Citadel Vault: a new way to think about Sovereign Inheritance. #Bitcoin #BitcoinInheritance #SelfCustody #CitadelVault #21sats

Buenos tardes. Citadel Vault is about backing up secrets and extending the storage lifespan up to 1000 years, offline. All while making them easily accessible to your heirs when the time comes. It’s 100% aligned with Bitcoin ethos! ✌🏼 View quoted note →

You set the rules. But what exactly are you protecting against? Most people think Bitcoin inheritance fails because of technical complexity. It doesn’t. It fails because no one designed it to survive real life. Here’s what Citadel Vault is built to withstand: The early claim. A beneficiary who acts too soon — out of desperation, pressure, or worse. Citadel Vault enforces a mandatory delay. A veto window only you can trigger while you’re alive. No one gets access before the conditions you defined are truly met. The compromised guardian. One corrupt trustee. One rogue co-signer. One company that folds. No single person or entity can unlock your vault alone. Threshold rules mean collusion requires more than one bad actor — by design. The surveillance threat. A custodian that knows your balance. A server that leaks your transaction history. A government that asks nicely — or doesn’t. Citadel Vault is air-gapped. Your data never touches a third-party server. What you hold stays between you and your rules. The technical heir. A grieving spouse handed a hardware wallet and a 24-word seed phrase. No one should inherit a puzzle. Citadel Vault gives your heirs a guided process — not a cryptography exam. The forgotten account. The exchange login. The 2FA key. The encrypted drive. The digital ID. Bitcoin is only part of your digital wealth. Citadel Vault covers your full digital estate — not just your sats. The long game. A custody company that existed in 2026 but not in 2046. Citadel Vault has no subscriptions. No ongoing dependency on any company — including us. The plan lives on the device. Forever. This is the threat model. Not theoretical. Not edge cases. These are the exact scenarios that have already erased billions in generational wealth. Citadel Vault was designed to survive all of them. 🔔 Next post: what the setup actually looks like — and why it takes 45 minutes, not 15 hours. #Bitcoin #BitcoinInheritance #SelfCustody #CitadelVault #21sats

Most inheritance “solutions” ask you to trust something that wasn’t built to last. A company. A server. A seed phrase hidden in a drawer. That’s not a plan. That’s a bet. Citadel Vault is built around a different idea: Inheritance shouldn’t depend on trust. It should depend on rules. Rules you set. Rules that can’t be overridden — by a company, a court, a rogue employee, or a grieving family member acting too soon. Here’s the philosophy behind it: → You stay in full control while you’re alive. No one can access your vault. No one can preview your balance. No one holds keys beside you. → Your heirs can always reach it — but only when the conditions you set are truly met. Not when someone guesses the password. Not when a company decides to cooperate. When the rules you defined are satisfied. Not before. → No subscription. No cloud. No third party between you and your Bitcoin. Citadel Vault is air-gapped. Your inheritance plan lives encrypted on the Vault Drive — not on someone else’s server. The Vault Drive is fully backed up, passphrase sharded on Vault Keys. Components are distributed across secure locations so your family is fully protected against any threat. → It covers your full digital life. Bitcoin. Passwords. 2FA keys. Exchange accounts. Encrypted drives. Legally documents. Digital IDs. Everything your family would need. In one place. With one clear process. → Your heirs don’t need to be technical. They follow a guided process. No command lines. No cryptography. No 15-hour expert session. 45 minutes of setup today protects everything, permanently. The goal was simple: make sovereign inheritance as robust as self-custody itself. Not an afterthought. Not a workaround. A battle tested protocol — built from two years of customer experiences incorporated into the Inheritance Computer from day one. Your Bitcoin is only truly yours if it can outlive you. 🔔 Next post: the threat model — what Citadel Vault is designed to survive. #Bitcoin #BitcoinInheritance #SelfCustody #CitadelVault #21sats