Hackers Return Most Stolen Bitcoin to Liquid Network

Key points

• Hackers returned 3,400 Bitcoin to Liquid Network on October 9, 2023.
• $47 million worth of Bitcoin is still missing.
• Blockstream and Liquid continue to fix security issues before restarting the network.

What happened to Liquid Network?

Liquid Network, a Bitcoin sidechain developed by Blockstream, experienced a significant security breach over the weekend. Hackers withdrew 4,000 Bitcoin, valued at approximately $320 million, from the network's federation wallet. The incident was first reported by SecurityWeek after Liquid disabled its network to halt transactions.

Liquid Network responded by notifying cryptocurrency exchanges, which then paused all deposits and withdrawals involving LBTC, the Bitcoin on their platform. Other assets like USDT and DePix were not affected. The stolen funds were taken using a specific authorization key, but Liquid confirmed that this key was not compromised. As of now, the exact method the hackers used to breach the system remains unclear.

Did the hackers return the funds?

Yes, but not all of it. On Monday, alleged 'white-hat' hackers returned 3,400 of the stolen Bitcoin, valued at approximately $262.6 million. However, about 598 Bitcoin, worth around $47 million, remains outstanding. These hackers claim they will return the remaining funds once Liquid resolves the vulnerability that enabled the attack.

What is being done to fix the issue?

Liquid Network remains paused as Blockstream and federation members work on security improvements. They aim to fix the issues that led to the attack and prepare for a safe restart of the network. Former Blockstream executive Samson Mow stated that the network will only resume operations once these updates are complete and secure. Liquid wallets and services are affected during this time, impacting users who rely on them for transactions.

Common questions

What should users of Liquid Network do?

Users should stay informed by following official updates from Liquid and Blockstream. They should avoid making transactions on the Liquid Network until it is fully restored.

Is my Bitcoin safe?

If your Bitcoin was not on the Liquid Network at the time of the theft, it remains safe. For those affected, the network pause is a measure to prevent further issues.

Can this happen again?

Liquid Network's developers are making security improvements to prevent future incidents. Users should always follow best practices for securing their cryptocurrency holdings.