$320M Bitcoin Heist Tests Liquid Network Security
A recent $320 million Bitcoin heist has raised questions about the security of Liquid Network. The incident involved around 4,000 BTC being withdrawn from Liquid's federation wallet, representing about 95% of its stored Bitcoins.
The attackers claimed to be 'white hats' and left a message on the blockchain for Liquid to 'contact us on chain.' However, there is no independent confirmation that they acted as ethical hackers rather than thieves.
Liquid uses a federation model with over 80 exchanges, infrastructure companies, and asset managers. The sidechain allows users to lock BTC and receive L-BTC, which enables faster settlement compared to direct transactions on Bitcoin's base layer.
An initial investigation linked the incident to a software flaw in Liquid's underlying Elements framework, rather than stolen private keys. The funds were moved through SideSwap using approved Peg-out Authorization Key infrastructure.