Liquid Network has largely resumed normal operations following the $320 million security breach, with block production and regular transactions running smoothly since September 10th. However, the crucial function of converting LBTC back into Bitcoin through peg-outs remains suspended. The recovery process has allowed users to resume using exchanges and wallets, though approximately 600 BTC from the incident is still unreturned. The technical root cause of the exploit has been identified, and a fix has been deployed through Elements v23.3.4.
After the $320 million hack that shook the crypto community, the Liquid Network has largely returned to normal operations. However, one of the main functions, involving converting LBTC back into Bitcoin [BTC] through peg-outs, is still suspended.
Block production and regular transactions have been running normally since 10th September, giving users the chance to move LBTC across the network again. With the step-by-step recovery process, users can now use exchanges, wallets, and other ecosystem services for their liquid-related functions, though caution remains as not all stolen Bitcoin has been recovered.
According to the 17th September update, several liquid ecosystem services have resumed activity. Mifiel has resumed issuing and processing its digital promissory notes, with batches giving normal confirmation.
Aqua has also restored liquid asset transfers and peg-ins. Its new Indra swap feature now allows users to swap between LBTC and Bitcoin on the Lightning Network, albeit with limited liquidity.
Other wallet providers are also making a comeback, but LBTC-related services requiring a peg-out remain restricted. This is because those routes require users to eventually move BTC out of Liquid.
For those unaware, during the 6th September incident, roughly 4,000 BTC was withdrawn. Of that, around 3,400 BTC has since been returned to the Federation reserve, leaving approximately 600 BTC still unreturned.
The technical root cause of the exploit has now been identified. The exploit path has been decoded, and an immediate fix has been released through Elements v23.3.4, the software underlying Liquid.
For a full recovery, Liquid will ultimately need to restore bridge functions, peg-outs, and exchange support so users can move LBTC and BTC normally again. The exploit resulted in 95% of its Federation peg wallet being withdrawn in a single transaction, though block production and regular transactions have been running normally since 10th September.
