Liquid Network resumes block production after $320M exploit caused 95% reserve drawdown

The Liquid Network, Blockstream’s flagship Bitcoin sidechain, restarted block production on September 10 after an exploit four days earlier drained roughly 3,996 BTC from the federation’s reserve wallet. At the time of the breach, that haul was worth approximately $320 million. The network is technically alive again, but user transactions and peg operations, the mechanism that lets people move BTC in and out of the sidechain, remain suspended while recovery work continues. What actually happened On September 6, at Liquid block 4,050,336, an attacker exploited a vulnerability in the Elements software that underpins the network. The bug allowed the creation of approximately 4,000 unbacked L-BTC tokens, which are supposed to be backed one-to-one by actual Bitcoin held in the federation’s reserve wallet. Those unbacked tokens were then used to drain the reserve. Before the exploit, the Liquid Federation held over 4,200 BTC. Afterward, the wallet contained roughly 197 BTC. That is a 95% drawdown in a single incident. The next day, September 7, the attackers, or at least entities claiming to be white-hat hackers, returned approximately 3,400 BTC to the federation. They kept 598.5 BTC for...