Liquid Network attack: 4,000 BTC withdrawn from federated custody
- —About 4,000 L-BTC were created without Bitcoin backing, and ~4,000 BTC worth $320 million were withdrawn
- —A vulnerability in the Elements software allowed acceptance of invalid cryptographic proofs
- —About 3,400 BTC were returned, while ~600 BTC worth $47 million were kept
- —Custody keys were not compromised, and the Bitcoin blockchain was unaffected
Why it matters: The incident shows that sidechains and wrappers around Bitcoin add new points of failure without inheriting the security of the main chain.
Source: Livecoins