Liquid Sidechain Halted Amid $320M Bitcoin Heist by Self-Proclaimed 'White Hats'

The Liquid sidechain has paused operations after a significant amount of Bitcoin was withdrawn from its federation wallet. Approximately 4,000 BTC worth around $320 million was moved by actors who claimed to be 'white hats', causing a disruption in bridging and settlement for L-BTC.

Liquid's operators took steps to disable bridge nodes and halt new transactions, while exchanges halted or prepared to halt L-BTC deposits and withdrawals. However, other assets issued on the network, such as USDT, DePix, and tokenized real-world assets, remained unaffected by the incident.

Blockstream, the technology provider behind Liquid, engaged with the actors through signed on-chain messages, with the actors promising to return most of the Bitcoin once a patch is confirmed and every node has updated. At the time of writing, the funds had not yet been returned, leaving investors and users concerned about the settlement and liquidity disruption for L-BTC.

The incident highlighted a vulnerability in the Elements software underlying Liquid, with SideSwap attributing the withdrawal to a bug rather than a compromise of its own systems.