The Liquid Network, a Bitcoin sidechain, experienced a significant security incident resulting in the loss of $320 million in Bitcoin. This amount accounts for approximately 95 percent of the funds held in the federation's wallet. The network, which launched in 2018, relies on a federation of over 80 financial firms and uses a multisig system requiring 11 out of 15 signatures to authorize fund movements.
The attackers identified themselves as white-hat hackers through an on-chain message. They claimed the exploit was intended to highlight a vulnerability and promised to return the funds once the security flaw is patched. The hackers specifically requested that all network nodes be updated to the latest commit to mitigate risks to the chain.
Liquid has suspended transactions and is currently working to restore services. The platform stated that the Peg-out Authorization Key belonging to the decentralized exchange SideSwap was used in the incident. SideSwap reported that the transaction was processed as a standard request after a customer sent 4,000 L-BTC to its service, resulting in a payout of 3,996 BTC.
The platform's security team has established contact with the attackers via an encrypted channel to coordinate the potential return of the assets. This event follows other recent security challenges in the cryptocurrency sector, including a $270 million hack involving the Drift trading platform in April.
