Bitcoin Sidechain Liquid Halted After Major Reserve Drain

The Liquid sidechain is currently frozen following a massive withdrawal that removed 4,000 Bitcoin from its reserves. This incident accounts for about 95 percent of the total Bitcoin held by the network. The withdrawal was processed through SideSwap, a settlement platform that uses Liquid, after an attacker identified a bug in the underlying software.

The party responsible for the drain claims they are white hat hackers acting to highlight security vulnerabilities. They have been communicating with Blockstream through onchain messages, requesting that the software bug be fixed before any funds are returned. While Blockstream has acknowledged the communication, they have not yet confirmed a resolution to the software issue.

For now, the network remains in a paused state. Deposits and withdrawals for L BTC are suspended, and bridge nodes are disabled to prevent further issues. Other assets like USDT that exist on the Liquid network are reportedly safe. Traders should watch for updates from the Liquid Federation regarding the status of the reserve funds and the timeline for a network restart.