Current outcome
Attackers exploited a vulnerability in Liquid Network's Elements software to mint unbacked L-BTC and drained roughly 4,000 BTC (~$320 million) from its reserve. About 3,400 BTC were returned on Sept. 7, and Blockstream is negotiating to recover the remaining ~600 BTC after patching bridge nodes and preparing an emergency update. This is one of the largest exploits involving a Bitcoin sidechain and directly tests how much trust users place in federated pegs and wrapped Bitcoin products. It shows that transaction-validation failures can jeopardize user funds even when no private keys or federation nodes are compromised. Liquid's reserve fell from about 4,205 BTC to 197 BTC before operations were halted; Liquid said USDT and other Liquid-issued tokens were unaffected by the vulnerability, though users could not transact during the pause. The validation failure occurred at the transaction level before the peg-out was initiated, so SideSwap's node and Liquid's distributed functionary nodes accepted the unbacked L-BTC, and roughly 600 BTC (~$47 million) remains outstanding.
Progress timeline
1 material updates- #01
Liquid Network hackers steal $320M in Bitcoin, return most after patch
Attackers exploited a vulnerability in Liquid Network's Elements software to mint unbacked L-BTC and drained roughly 4,000 BTC (~$320 million) from its reserve. About 3,400 BTC were returned on Sept. 7, and Blockstream is negotiating to recover the remaining ~600 BTC after patching bridge nodes and preparing an emergency update. This is one of the largest exploits involving a Bitcoin sidechain and directly tests how much trust users place in federated pegs and wrapped Bitcoin products. It shows that transaction-validation failures can jeopardize user funds even when no private keys or federation nodes are compromised. Liquid's reserve fell from about 4,205 BTC to 197 BTC before operations were halted; Liquid said USDT and other Liquid-issued tokens were unaffected by the vulnerability, though users could not transact during the pause. The validation failure occurred at the transaction level before the peg-out was initiated, so SideSwap's node and Liquid's distributed functionary nodes accepted the unbacked L-BTC, and roughly 600 BTC (~$47 million) remains outstanding.
Source evidence: siliconangle.com