Bitcoin network used by exchanges hit by $320 million exploit. Hackers claim they're the 'good guys'
The Liquid Network, a Bitcoin sidechain, halted transactions after hackers exploited a software bug to drain nearly 4,000 bitcoin. The attackers claimed to be 'white-hat' hackers, though the incident has raised significant concerns regarding the security of the network's reserve model.
Why it matters
This exploit exposes vulnerabilities in crypto-infrastructure and challenges the security assumptions of sidechain models used to speed up Bitcoin transactions.
Liquid Network, launched in 2018 by Blockstream, said purported “white-hat hackers,” removed roughly 4,000 of the 4,200 bitcoin held in its federation wallet. The network is overseen by a federation of more than 80 exchanges, infrastructure firms and asset managers.
“Liquid wallets will be impacted, and we’re sorry for any inconvenience,” Liquid Network said on X , halting all new transactions. “Federation members are actively working on resolving this so we can restore normal network activity.”
The sidechain halted new transactions and warned that wallets would be disrupted while federation members work to restore service. The episode matters because Liquid was built to solve a practical problem for exchanges, mainly the slow speed of the Bitcoin blockchain. To solve that, the network issues L-BTC against bitcoin locked in reserve so trades can settle faster. A drain of nearly the entire reserve raises doubts about the security of that model.
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