White Hat Hackers Drain 4,000 BTC from Liquid Network Reserves

The Liquid Network, a popular Bitcoin sidechain, is currently working to address a major security breach. Attackers managed to withdraw 4,000 bitcoin, worth approximately 320 million dollars, from the network federation wallet. The team responded by disabling bridge nodes and pausing the sidechain to contain the incident.

The breach appears to stem from an inflation bug on the L BTC sidechain. This allowed the attackers to generate fake assets and trick the network into signing a legitimate looking withdrawal transaction for the real bitcoin backing those assets. Other assets on the network, including tether, remain unaffected.

Evidence suggests the attackers are labeling themselves as white hat hackers. They have moved the funds to a specific address and are actively communicating with the team via on chain messages and encrypted messaging apps. While the situation remains tense, there is a possibility the funds will be returned in exchange for a security bounty.

For now, users holding L BTC should remain cautious as the underlying bitcoin is currently not redeemable. Exchanges have been instructed to halt all deposits and withdrawals involving L BTC while the network developers work toward a resolution. This event serves as a sharp reminder of the risks associated with bridge infrastructure and sidechain security.