The Liquid Network has restarted block production following a security incident that resulted in the unauthorized withdrawal of approximately 4,000 BTC. The network deployed emergency software updates to its functionary and bridge nodes to address a vulnerability in the proof-verification cache.
Despite the resumption of block production, the network remains in a restricted state. Transactions and peg operations, including PAK-authorized peg-outs, are currently suspended. The team is monitoring the system to ensure full stabilization while working to restore the BTC and L-BTC reserves.
The incident involved a bug in the Elements software, which allowed the withdrawal of nearly 95% of the federation wallet's 4,200 BTC balance. The total value of the initial withdrawal was estimated at $320 million. Following the deployment of patches, actors returned 3,400 BTC.
As of September 7, approximately 598 BTC, valued at roughly $46 million, remained outstanding. The network released Elements v23.3.4 to harden cache keys used for range proofs as part of its recovery strategy. Operations were initially paused on September 6.
