Blockstream launches swaps service after Boltz suspends operations

Blockstream has launched Blockstream Swaps in beta testing after noncustodial swap provider Boltz suspended its services following months of automated probing and several exploits.

Blockstream said in an Aug. 10 announcement that the in-house service is already being tested with select participants, with development now being accelerated after Boltz stopped processing swaps on Aug. 3. The Bitcoin infrastructure company said the product was under development before the shutdown and is intended to add another option for users moving funds between Bitcoin, Lightning and Liquid.

Boltz said its suspension followed a steady increase in automated, AI-assisted attempts to probe its infrastructure, along with several exploits that the team said were contained. The company kept its swap services offline because attackers were iterating faster than its developers could identify and patch weaknesses.

“Attackers now iterate faster than a team our size can find and patch,” Boltz said in the statement quoted by Blockstream.

The swap provider said customer funds were never at risk because its architecture is self-custodial. Refund mechanisms also remained available while normal swap operations were disabled.

As crypto.news reported on Aug. 4, Boltz initially restricted swaps involving assets such as USDT, USDC, WBTC, TBTC and RBTC after identifying a bug in its Ethereum Virtual Machine integration on Aug. 1. Bitcoin, Lightning and Liquid swaps remained available at that stage before the company suspended all swap services two days later.

Blockstream Swaps enters beta after Boltz shutdown

Blockstream described its new service as an in-house swaps feature built for the Lightning and Liquid networks, with organizations now able to request access to the beta program.

Development was already “well into” its testing process before the Boltz suspension, according to the company. Blockstream said the recent disruption reinforced its decision to speed up the rollout, while stressing that the product is not intended to displace existing providers.

“We are not seeking to replace any providers,” Blockstream said. “We see Blockstream Swaps as a much-needed addition to improve redundancy and resilience to the ecosystem.”

Boltz had previously worked with Blockstream and other Bitcoin applications that relied on its infrastructure to move assets between Bitcoin mainnet, Lightning and Liquid. Its Aug. 3 shutdown also affected services at Bull Bitcoin, Aqua and ZEUS that depended on the provider’s swap infrastructure, according to the earlier report.

For Blockstream, adding its own implementation gives its ecosystem another swap provider without requiring users to hand custody of their bitcoin to an intermediary during the transaction.

The company said Blockstream Swaps can support users holding BTC on Bitcoin mainnet or LBTC on Liquid who need to interact with Lightning without managing Lightning channels directly.

Atomic swaps let users move bitcoin between networks

At the technical level, Blockstream said an atomic swap lets two parties exchange assets without relying on a trusted intermediary to hold both sides of the trade.

The transaction is structured so that both transfers complete or neither one does. If the swap cannot be completed within its specified conditions, the funds remain recoverable by their original owners.

Boltz uses a form built around hashed time-locked contracts, or HTLCs. Under the setup described by Blockstream, one party generates a secret and publishes its cryptographic hash, while payments on both sides of the swap are locked to the same condition.

Revealing the secret to claim one payment allows the other side to use it to complete the corresponding transaction. Timelocks provide a refund route when the swap is not completed within the required period.

Boltz later incorporated Taproot and MuSig2 into the construction, according to Blockstream, allowing cooperative transactions to settle through a normal key-path spend while keeping the script path available as a fallback.

Different transaction directions also use separate swap types. A submarine swap moves BTC or LBTC into Lightning, while a reverse submarine swap takes Lightning funds back to Bitcoin mainnet or Liquid. Chain swaps allow BTC and LBTC to be exchanged without a custodial intermediary.

Atomic swaps have formed part of Bitcoin development for years. An earlier Liquid Network launch report covered Blockstream’s 2018 rollout of the Bitcoin sidechain, which introduced L-BTC as a bitcoin-pegged asset designed for faster transfers and other functions outside the main chain.

Blockstream also developed LiquiDEX, a separate swap protocol for exchanging two assets issued on Liquid in a single transaction. According to the company, LiquiDEX does not require the same hashlock and timelock structure used in HTLC-based swaps.

Instead, a maker signs an input using SIGHASH_SINGLE and SIGHASH_ANYONECANPAY, allowing a taker to add inputs and outputs without invalidating the maker’s signature. Blockstream said the protocol is already used by platforms including SideSwap and can support trustless over-the-counter trading and order books.

Blockstream Swaps targets Lightning channel complexity

Lightning users normally need access to channels with enough liquidity to send or receive payments. Running Lightning directly can require users or service providers to operate a node, open channels, commit capital and obtain inbound liquidity.

Blockstream said its swap model is designed to handle that conversion when a payment is made, allowing a user to keep BTC or LBTC and exchange it into the required Lightning payment as part of the transaction.

Under one example given by the company, a user can pay a Lightning invoice using a balance already held on Bitcoin mainnet or Liquid without first opening and funding a Lightning channel.

Incoming Lightning payments can also be converted into LBTC. Blockstream said its wallet setup allows an incoming Lightning transaction to settle as LBTC into a wallet secured with its Jade hardware device while Jade remains offline during receipt of the payment.

Merchants can similarly accept a Lightning payment and settle the funds on their preferred supported network, according to the company.

Blockstream’s own product lineup already spans the three networks involved in the swap service. Its current wallet supports on-chain Bitcoin, Lightning and Liquid, while the company also develops Core Lightning and operates the Liquid Network.

Boltz, meanwhile, has not announced a date for restoring its swap services. Its Aug. 3 notice said the API would remain available for cooperative refunds, while unilateral refunds would continue to work without depending on Boltz infrastructure. Support services also remained available while the team assessed the attacks and its next steps.