Hackers Steal $320M Worth of Bitcoin from Liquid Network, Retain Bounty

Hackers stole approximately $320 million worth of Bitcoin from the Liquid Network over the weekend. The attackers exploited a vulnerability in an open-source project called Elements, which underpins the sidechain's centralized transaction approval workflow.

The Liquid Network is a layer two Bitcoin network that replaces the traditional decentralized process with a more centralized workflow. Users can't view the value of one another's transactions, and the system allows for moving funds to and from other blockchains through SideSwap.

The hackers used the peg-out authorization key (PKA) to steal 4,000 coins, representing about 95% of the Liquid Network's Bitcoin reserve. The stolen assets included only Bitcoin, while other cryptocurrencies stored on the sidechain were not affected.

After the breach, the attackers embedded a message in a public Bitcoin transaction log, informing Blockstream that they would return most of the stolen cryptocurrency once the vulnerability was patched. Most of the stolen funds were returned, but the hackers retained $47 million worth of Bitcoin as a 'bounty' for bringing attention to the vulnerability.