Liquid Sidechain Halted After 4,000 BTC Withdrawn in White-Hat Incident
Bitcoin sidechain Liquid has halted network activity after approximately 4,000 BTC was withdrawn from its Federation wallet in a security incident.
The actors behind the withdrawal claim they are white-hat hackers and intend to return most of the funds once the underlying software flaw is fixed.
Liquid stated that other assets on the platform were not impacted, such as USDT and real-world assets. The issue was specific to L-BTC, a Bitcoin-based asset to Liquid, which can be pegged out to unlock an equivalent number of Bitcoin from reserves.
SideSwap claims its systems were not compromised, but Blockstream dubbed the L-BTC involved in the deal 'bugged' by the Elements software. The actors have been communicating with Blockstream via signed Bitcoin messages and have sent encrypted technical information to aid in the recovery process.