Liquid Network, a Bitcoin-linked blockchain used by several cryptocurrency exchanges, has been hit by a security breach that saw around 4,000 Bitcoin worth approximately US$320 million withdrawn from its federation wallet.
Liquid Network said the funds were taken by purported “white-hat hackers”, who typically exploit vulnerabilities with the intention of returning stolen assets, sometimes in exchange for a fee.
The network has since halted new transactions as federation members work to resolve the incident and restore normal activity.
Liquid Network said the Bitcoin was withdrawn through SideSwap, a settlement platform authorised to handle transfers from the network, although it said the underlying key had not been compromised.
The network, launched in 2018 by blockchain technology company Blockstream, is managed by a federation of more than 80 exchanges, infrastructure companies and asset managers.
Liquid Network is designed to enable faster Bitcoin transactions by issuing Liquid Bitcoin, or L-BTC, against Bitcoin held on the network. Among the exchanges listed by Blockstream as users are BTSE, Bitfinex and BitMEX.
Aneirin Flynn, chief executive of cybersecurity technology firm FailSafe, said preliminary evidence pointed to a bug that allowed the minting of L-BTC.
“With roughly 95% of reserves drained and the network paused, the incident exposes a critical weakness in Liquid’s validation and backing model,” Flynn said.
The breach adds to a growing list of attacks targeting crypto infrastructure. Last week, an attacker drained US$6 million from a Crypto.com-linked digital asset lending platform, while an August attack involving Bitcoin wallet Coldcard also raised concerns over digital asset security.
Bloomberg
