Liquid Network Hacked: $320 Million in Bitcoin Stolen
A major security breach has drained nearly $320 million from Liquid Network, a system used to move Bitcoin between exchanges and traders. The incident occurred on Sunday when approximately 4,000 Bitcoin were withdrawn from Liquid's reserves.
The breach appears to have exploited a flaw in the software underpinning Liquid, allowing users to create L-BTC tokens that weren't backed by Bitcoin. These tokens were then exchanged for Bitcoin held in Liquid's reserves.
SideSwap, a service authorized to handle withdrawals, processed the request normally and destroyed the L-BTC before releasing the corresponding Bitcoin to the customer's address 23 minutes later. However, Blockstream later determined that the 4,000 L-BTC had been created through a vulnerability in Elements, the software on which Liquid runs.