Liquid Network Recovers 3,400 BTC After Security Incident

The Liquid Network has successfully recovered 3,400 BTC following a recent security incident that saw approximately 4,000 BTC moved from its Federation wallet. The parties behind the move, who claimed to be white hat hackers, returned the bulk of the assets after Blockstream applied security patches to the affected bridge nodes. Currently, 598 BTC are still missing while discussions continue to recover the remaining balance.

Blockstream has kept the sidechain paused while it works on fixing the underlying issues and preventing a chain split. The incident was triggered by an unauthorized use of the SideSwap Peg out Authorization Key. Because of these risks, the team has strongly advised users to avoid sending any Bitcoin to Liquid peg in addresses until the network is officially confirmed to be back online.

The situation has sparked heated debate across the industry. Some observers, including Ledger CTO Charles Guillemet, have raised concerns that the incident looks less like a white hat intervention and more like a potential extortion scheme. Other commentators have labeled the event a major setback for the reputation of the sidechain.

For now, the focus remains on the safe restart of the network. Blockstream and the Liquid Federation are performing final security audits and software updates to ensure the environment is safe for users. Investors should keep a close watch on official announcements for updates on when deposits and withdrawals might resume.