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      Liquid Network Experiences Major BTC Withdrawal Due to Software Bug

      On September 6, the Liquid Network, operated by Blockstream, experienced a significant incident where 3,996 BTC, valued at nearly $320 million, were withdrawn from its federation wallet. This withdrawal occurred after a corresponding burn of Liquid Bitcoin (L-BTC), resulting in a drastic reduction of the federation's reserves from approximately 4,200 BTC to about 197 BTC, marking a 95% decline in a single transaction.

      The issue arose when a decentralized exchange, SideSwap, processed a customer submission of 4,000 L-BTC. A software bug in the Elements node, which powers Liquid's infrastructure, allowed the peg-out to occur without the necessary safeguards being followed. Both Blockstream and SideSwap confirmed that the withdrawal was not due to a compromised key or external hacking, but rather a flaw in the software.

      In response to the incident, the federation quickly paused all bridge nodes and alerted exchanges to halt L-BTC deposits and withdrawals, preventing further losses. However, this action also froze the bridge connecting Liquid to Bitcoin's mainnet, raising concerns about the network's ability to handle future redemption demands if peg-outs are reopened. Despite the situation, other assets on the Liquid Network, such as USDT and tokenized securities, remain unaffected by the bug, which specifically targeted the BTC peg-out mechanism.

      © 2026 KLEA News. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

      Source: KLEA News

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