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      Liquid Network Loses $320 Million in Major Hack

      Blockstream's Liquid Network, a prominent Bitcoin sidechain, experienced a significant security breach on September 6, resulting in the loss of approximately 4,000 Bitcoin (BTC), valued at around $320 million. The incident was triggered by a bug in the Elements software, which allowed hackers to withdraw nearly all of the network's reserves, reducing them from over 4,200 BTC to about 197 BTC in a single transaction. This breach marks one of the largest security incidents involving a Bitcoin-related network this year.

      The attackers, who identified themselves as white-hat hackers, returned approximately 3,400 BTC after Blockstream confirmed that the vulnerability had been patched. They retained around 598 BTC, worth roughly $47 million, as a self-appointed bounty. Importantly, no federation keys were compromised during the attack, as the Liquid Network operates on an 11-of-15 federation multisig model, which requires the approval of 11 out of 15 designated entities for transactions.

      In the aftermath of the hack, all activity involving Liquid Bitcoin (L-BTC) has been suspended across exchanges, and there is currently no timeline for the resumption of normal operations. This incident raises critical questions about the federated sidechain architecture, which relies on a small group of entities to secure the bridge between Bitcoin's main chain and the sidechain. The vulnerability in the Elements software highlights the need for more rigorous review processes for open-source codebases used in blockchain technology.

      The implications of this breach extend beyond the Liquid Network, as the Elements codebase is utilized by various projects. The incident underscores the importance of ensuring that similar vulnerabilities do not exist in other implementations. The retention of the bounty by the hackers also introduces a complex legal and ethical dimension, as it remains unclear how regulators and law enforcement will categorize this act in the context of responsible disclosure versus theft.

      © 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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