Liquid Network Nears Recovery After Major Hack Resulting in 4,000 Bitcoin Theft

The Liquid Network has reported that it is entering the final stages of recovery after a significant hack that occurred in September, during which hackers stole 4,000 bitcoin from its federation wallet. This theft, valued at around $320 million at the time, was executed through an inflation bug on the Liquid sidechain, allowing the hackers to create non-existent tokens backed by bitcoin and cash them out for real on-chain BTC.

In a blog post, the Liquid Network stated that it has made substantial progress with enhanced security measures in place. The final phase of restoration includes reestablishing the network's full 1:1 bitcoin backing and the controlled reactivation of Federation peg-outs for authorized PAK key holders. Blockstream, the organization behind Liquid, has successfully negotiated the return of most of the stolen funds.

Blockstream CEO Adam Back confirmed via social media that swaps are operational again, allowing users to exchange stablecoins for bitcoin and utilize the Lightning Network on applications supporting the Liquid Network. Despite the recovery efforts, the hackers retained about 600 bitcoins, equivalent to 15% of the total stolen amount, which they have yet to return.

The hackers, who claimed to be white hat, criticized Blockstream during their communications, threatening to disclose sensitive information unless a bounty was paid. This incident has raised concerns about the security measures in place within the Liquid Network and the implications for users moving forward.