Liquid Bitcoin sidechain hack drains $320M, network frozen
Roughly 4,000 Bitcoin, worth around $320 million, vanished from a wallet tied to Blockstream’s Liquid Network over the weekend, triggering an emergency pause of the sidechain and a scramble across exchanges to protect users. The Liquid Bitcoin sidechain hack — if that’s even the right word for it — appears to be the work of self-described white hat actors who say they intend to give most of the funds back once a software flaw is fixed. For now, the network remains frozen, and the crypto industry is watching closely to see whether that promise holds.
Key takeaways
- About 4,000 BTC — roughly 95% of the wallet’s approximately 4,200 BTC balance — was withdrawn from Liquid before the sidechain was paused.
- Purported white hat hackers say they will return most of the funds once the underlying Elements vulnerability is patched network-wide.
- Liquid disabled bridge nodes to block new transactions, and several exchanges halted or prepared to halt L-BTC deposits and withdrawals.
- SideSwap confirmed its Peg-out Authorization Key was not compromised; the exploit stemmed from a bug in the open-source Elements software.
- Other assets on the Liquid network, including USDT, DePix, and tokenized real-world assets, were unaffected.
Liquid Sidechain Pauses After Major Bitcoin Withdrawal
Liquid’s federation moved to freeze the sidechain on Sunday after detecting the massive outflow, cutting off new transactions network-wide while teams assessed the damage. The decision came fast, and it needed to — nearly all of the wallet’s holdings were already gone by the time the alarm went off.
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