Blockstream’s Liquid Network halts trading following $320 million bitcoin exploit
The Bitcoin sidechain suspended operations after a software bug allowed the withdrawal of nearly its entire bitcoin reserve, raising fresh concerns over the security of alternative settlement layers.
Blockstream’s Liquid Network has suspended all transactions following a security exploit that drained approximately $320 million worth of bitcoin. The breach removed roughly 4,000 of the 4,200 bitcoin held in the platform’s federation wallet, forcing an immediate halt to new network activity.
Unlike recent crypto breaches driven by compromised private keys, this incident stemmed from a software bug within the Elements node-level transaction system. The illicitly generated funds were subsequently routed through SideSwap, an approved trading platform on the network that could not distinguish the flawed coins from legitimate assets.
Purported white-hat hackers behind the withdrawal are communicating with network maintainers via on-chain Bitcoin messages. They have pledged to return the assets once the underlying vulnerability is resolved. They stated, “Please fix the bug first. The chain is under risk at least commit right now. Make sure every node is patched. Then we will transfer the money back safely after confirming the fix.”
Liquid Network is governed by a federation of more than 80 exchanges, infrastructure firms, and asset managers. The organization confirmed the disruption on X, noting that federation members are actively working to resolve the issue. However, no timeline for reopening the network or recovering the bitcoin has been provided.
Launched in 2018, the sidechain was designed to accelerate trade settlement for exchanges by issuing L-BTC against locked bitcoin reserves. The near-total depletion of this reserve fundamentally challenges the security assumptions of this faster settlement model for institutional users. Other types of assets on the same network were not affected by the exploit.
This event marks another significant security failure in the digital asset sector, compounding existing investor anxiety. It follows a $6 million drain last week from a lending platform associated with Crypto.com. Furthermore, the sector recently experienced an August breach involving Coldcard hardware wallets.
