Liquid Network loses $320m in Bitcoin exploit

Mettis Global reported that roughly $320 million in bitcoin has been drained from the reserves of Liquid Network, a settlement network that cryptocurrency exchanges rely on. The attackers removed nearly 4,000 bitcoin from a federation wallet that held 4,200, marking the newest such breach in the sector this year. Bitcoin was down 0.18% at $79,659 at its last quote.

Blockstream introduced the sidechain in 2018, and more than 80 exchanges, infrastructure firms and asset managers share oversight of it through a federation. The network exists to quicken Bitcoin transfers between trading platforms, with L-BTC issued one-for-one against reserved bitcoin. The drain has raised questions about how durable that setup is. The breach did not involve a stolen password or private key, the usual route in most of this year's crypto thefts.

Funds were routed out through SideSwap, an authorised venue within the trading setup. A Blockstream review found that a software bug in Elements had improperly created bitcoin, and SideSwap processed those coins alongside legitimate ones because it could not separate them. According to CoinDesk, the person responsible frames the move as ethical and has proposed returning the money once the defect is fixed. Liquid has apologised, paused new transactions and said federation members are working to restore normal activity.