$320M Bitcoin Hack: What Really Happened to Liquid Network?

On Sept. 6, Liquid Network disclosed that about 4,000 BTC▲$62,630.00 — about $320 million at that time — had been withdrawn from Liquid Federation wallet.

What Happened to Liquid Network?

$320 Million in Bitcoin Was Withdrawn From Liquid’s Federation Wallet

Liquid Network $320 million hack affected the L-BTC issued against Bitcoin sidechain, but not Bitcoin blockchain, because funds are separate.

Liquid initially stated that the withdrawal was made via SideSwap’s Peg-out Authorization Key (PAK) and that the PAK was not compromised. Later reports showed that SideSwap did send 4,000 L-BTC via SideSwap’s Peg-out service and burned it with valid authorization. Liquid Federation subsequently released 3,996 BTC.

Nearly 4,000 BTC Were Taken From Around 4,200 BTC in Reserves

Liquid held approximately 4,200 BTC in reserves before the incident. The withdrawal therefore represented about 95% of those reserves, making the Liquid Network 4000 BTC hack particularly significant for a system built around a 1:1 peg between BTC and L-BTC.

These funds were found to be in Liquid’s federation-controlled reserves, which were not dependent upon Bitcoin base-layer consensus and network.

Liquid Network Halted Transactions After the Incident