Liquid Network: Negotiating with White Hat to Recover Remaining 598.5 BTC, Network Restoration Underway

Odaily News: Liquid Network's official security incident report states that on September 6, a vulnerability in the open-source software Elements related to the validation of Liquid node cached range proofs was exploited, resulting in the creation of approximately 4,000 LBTC without bitcoin reserve backing. The exploiter subsequently exchanged them for approximately 4,000 BTC via SideSwap and the Liquid standard Peg-out mechanism. Before the incident, Liquid's reserves were approximately 4,205 BTC, and after the relevant Peg-out and other withdrawals before the network halt, reserves temporarily dropped to 197 BTC.

Liquid Network stated that this incident did not involve the compromise of Functionary nodes or private keys, and other issued assets on Liquid such as USDT were not affected by the vulnerability. The exploiter claimed to be a white hat security researcher and returned 3,400 BTC to the Liquid Federation Peg wallet on September 7. Currently, approximately 598.5 BTC (about 15% of the involved funds) remain unrecovered, and Blockstream is in communication to recover the remaining assets.

Liquid Network also stated that the current priority is to recover the remaining funds and restore Liquid Network to normal operation as soon and as safely as possible. A fix for the vulnerability has been developed and is undergoing multiple rounds of internal and external review. Blockstream is preparing to urgently release Elements v23.3.4, which is expected to be released as soon as it is ready, with a target rollout within approximately 48 hours. After the software update is complete, Liquid Network Functionary operators will make further adjustments to restore full network functionality and the corrected network state, including rejecting previously invalid Peg-outs.