Liquid Sidechain Bug Allows Attacker to Mint Thousands of Unbacked L-BTC

A flaw in Liquid's Bitcoin sidechain allowed an attacker to create nearly 4,000 unbacked L-BTC without the necessary Bitcoin backing.

The bug was detected on September 6 by blockchain security firm SlowMist and used a cache collision to bypass Elements' range-proof checks.

SlowMist said the attacker manipulated node caches using setup transactions before minting the unbacked coins, which could then be redeemed for Bitcoin.

Liquid paused Bitcoin deposits and withdrawals through its peg while applying updates to fix the issue, limiting further movement of funds.

The incident did not involve compromised private keys or smart contracts, but rather a weakness in earlier versions of Elements, specifically before version 23.3.4, which was released on August 3.