Liquid Network Restarts Block Production After $320M Bitcoin Exploit
Network Resumes Block Production After Security Pause
The Liquid Network has started producing blocks again following a security incident that led to the withdrawal of approximately $320 million in Bitcoin. The network paused operations on September 6 and has now taken initial steps toward recovery.
In a post on X, Liquid stated that block production resumed on September 10 without transactions as a precautionary measure. The network is being monitored to confirm full stabilization.
Key Details of the Incident and Recovery
- Actors claiming to be white-hat hackers withdrew about 4,000 Bitcoin (BTC), worth roughly $320 million, from the federation wallet.
- This withdrawal represented about 95% of the wallet's balance of roughly 4,200 BTC.
- About 3,400 BTC, worth approximately $270 million at the time, was returned after affected bridge nodes were patched.
- As of September 7, about 598 BTC, worth roughly $46 million, remained outstanding.
- An emergency software update, Elements v23.3.4, was released to address the proof-verification cache vulnerability linked to the incident.
Liquid Network's Official Statements
Liquid Network announced on X that functionary and bridge nodes have received required updates. Functionary nodes are now signing and validating blocks as intended. The network emphasized that peg operations, including PAK-authorized peg-outs, remain suspended.
The emergency update to Elements, the open-source software underpinning Liquid, hardened cache keys used for range proofs as part of the recovery plan.
How the Exploit Unfolded
The incident began when actors withdrew about 4,000 BTC from Liquid's federation wallet. This involved L-BTC, a token pegged to Bitcoin, originating from a bug in the Elements software. The withdrawal paused the network on September 6.
After Blockstream confirmed that affected bridge nodes had been patched, the actors returned 3,400 BTC. The network then proceeded with recovery steps, including the software update.
What Remains Suspended During Recovery
Peg operations, which allow conversions between Bitcoin (BTC) and Liquid Bitcoin (L-BTC), are still suspended. Liquid is working to restore its BTC/L-BTC reserve, which supports the value of L-BTC tokens.
The network continues to monitor operations to ensure full stabilization before resuming all functions.
