Liquid Network resumes block production after $320M Bitcoin exploit

Liquid Network has resumed block production following a major exploit that resulted in a $320 million Bitcoin withdrawal. While functionary and bridge nodes have received necessary software updates to sign and validate blocks, the network is currently operating in a limited recovery mode. Transactions and BTC peg operations remain suspended to allow developers to monitor the system for full stabilization and rebuild the BTC/L-BTC reserve.

The exploit targeted a vulnerability in the Elements software stack related to proof verification cache handling. While hackers returned 3,400 BTC, approximately 598.5 BTC remains outside the federation wallet. Negotiations between the attackers and Blockstream have shifted from encrypted communications to public plaintext messages. The attackers are reportedly demanding a 10% bug bounty to be paid from Blockstream’s own funds in exchange for the remaining assets.

Blockstream CEO Adam Back has stated that the company will compensate for the damages if necessary, while continuing to communicate via encrypted, PGP-signed notes. The network remains under close observation as operators work to restore full functionality and secure the peg system.