ChainCatcher report, according to Bitcoin News monitoring, Liquid Federation released an incident report stating that the attacker exploited a validation cache vulnerability in Elements’ range proofs to mint approximately 4,000 unbacked L-BTC, then exchanged them for real BTC via SideSwap’s authorized exit anchor pathway. Liquid’s governing entities treated these transactions as valid and released approximately 4,000 BTC from the federation’s reserves. Prior to the incident, Liquid held about 4,205 BTC; before suspending operations, reserve levels dropped to a minimum of 197 BTC. The attacker, identifying as a white hat, has since returned 3,400 BTC, leaving approximately 598.5 BTC still unreturned. No private keys were compromised, and the exit anchor mechanism functioned as designed. Liquid remains offline, and Blockstream is preparing to release an emergency version of Elements v23.3.4 and is working to restore the network under a 1:1 BTC reserve backing.
Liquid Federation Discloses 4,000 BTC Vulnerability Incident
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Summary
Liquid Federation disclosed a 4,000 BTC vulnerability exploit stemming from a flaw in the Elements range proof verification cache, enabling an attacker to mint unbacked L-BTC and convert them to BTC via SideSwap’s exit anchor. The federation honored the transactions, causing reserves to drop from 4,205 BTC to 197 BTC before operations were halted. A white-hat attacker returned 3,400 BTC, leaving 598.5 BTC unaccounted for. No private keys were compromised, and the anchor functioned as designed. Liquid remains offline as Blockstream prepares an emergency Elements v23.3.4 update to restore 1:1 BTC backing. The incident may temporarily affect the BTC price and BTC dominance.
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