Bitcoin-based Liquid Network says $320 million withdrawn in hack

• About 4,000 of 4,200 bitcoin (approximately $320 million) were withdrawn from Liquid Network's Federation wallet
• Funds were withdrawn via SideSwap, an authorized settlement platform, though the key used was not compromised according to Liquid Network
• Liquid wallets are impacted and new transactions have been halted as the network responds to the security breach

Summary: Liquid Network $320 Million Hack

Key Incident:

Liquid Network, a Bitcoin-based payments and settlement network, announced on Sunday, September 6, that approximately $320 million was withdrawn from its federation wallet in a security breach. The hack involved roughly 4,000 of the 4,200 bitcoin held in the Liquid Federation wallet.

Attack Details:

The network stated that "purported white-hat hackers" were responsible for the withdrawal, suggesting uncertainty about the attackers' intentions. The funds were withdrawn through SideSwap, an authorized settlement platform with legitimate withdrawal permissions. Notably, Liquid Network emphasized that the key used in the process was not compromised, indicating the attack exploited other vulnerabilities.

Immediate Response:

Liquid Network has halted all new transactions on its platform to contain the breach. The company acknowledged that Liquid wallets will be impacted and apologized for any inconvenience to users.

Market Implications:

This incident highlights ongoing security vulnerabilities in cryptocurrency infrastructure, particularly in layer-2 and sidechain networks built on Bitcoin. The breach affects users' ability to transact on the Liquid Network, potentially disrupting trading and settlement activities. The attack's scale—representing approximately 95% of the wallet's bitcoin holdings—raises concerns about security protocols at cryptocurrency custody and settlement platforms.

The designation of attackers as potential "white-hat hackers" may suggest the possibility of funds being returned, though this remains uncertain. This event adds to the cryptocurrency industry's security challenges and could prompt increased scrutiny of similar networks' security measures.