Crypto : Liquid Restarts After the Exploit, but the Network Runs on Empty

Liquid Network has resumed producing blocks after the attack that allowed the creation of nearly 4,000 LBTC not backed by bitcoins. The network is operational again, but users must still wait before they can make transactions or convert their BTC into L-BTC.

Liquid restarts producing blocks

The resumption does not yet mean a return to normal. Liquid has restarted block production but without allowing user transactions. This step aims to allow operators to verify that the network works properly before gradually reopening other services.

The flaw exploited on September 6 concerned Elements, the open-source software used by Liquid. According to the report published by the team, the vulnerability affected the way nodes cached the verification of range proofs. The exploitation allowed the creation of about 4,000 LBTC that were not backed by the bitcoins held in the reserve.

The network then suspended its operations to prevent the attack from causing further damage.

The fix targets the problem directly

To fix the flaw, Elements developers released version 23.3.4 on September 9. The most important change precisely concerns the cache of range proofs: the keys used by this mechanism have been strengthened and an option now allows completely disabling this cache.

Liquid then began updating its nodes. The goal is simple: secure the network before allowing fund movements again.

The attack had emptied about 95% of the bitcoins in the federation’s wallet. The perpetrators, who present themselves as “white hat” hackers, claimed they wanted to return the funds after the flaw was fixed. About 3,400 BTC were eventually returned, while an amount close to 600 BTC is still missing.

L-BTC remains under surveillance

The main issue now concerns the bitcoin reserve. Liquid keeps the suspension of peg operations, which allow converting BTC into L-BTC and vice versa.

This pause remains important. Each L-BTC must correspond to a bitcoin held in Liquid’s reserve. As long as the team has not replenished and verified this reserve, it cannot resume conversions under normal conditions.

Liquid is therefore proceeding step by step. The team has restarted block production and must now restore transactions before reopening peg operations.

About 598 BTC, nearly 46 million dollars as of September 7, are still missing. Liquid has not yet explained who will bear this loss: L-BTC holders, the federation, or potential insurance.

The incident also highlights the weight of software risk in crypto networks. Liquid fixed the flaw and restarted its chain in a few days. It must now reassure users about the real backing of each L-BTC in circulation.