Liquid Reports Exploit Minting 4,000 Unbacked LBTC; BTC Reserves Fall to 197 BTC
AI Market Summary
Liquid disclosed an exploit in Elements range-proof validation that enabled minting ~4,000 unbacked LBTC and redemption for real BTC via the authorized exit anchor, draining federation reserves from ~4,205 BTC to 197 BTC before shutdown. Although 3,400 BTC was returned, ~598.5 BTC remains outstanding. The network is offline pending an emergency Elements release, highlighting sidechain/bridge risk and operational fragility in wrapped-BTC systems.
Impact level
● Medium
Affected assets
BTC/USDT-0.36%
AI Insight · BTC/USDTAI Insight
▼ Bearish
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Liquid Federation has published an incident report after an attacker exploited a validation-cache flaw affecting Elements range proofs, allowing the minting of roughly 4,000 unbacked LBTC. The tokens were then swapped into real BTC through SideSwap's authorized exit anchor route. Liquid's governing entities treated the transactions as valid and released about 4,000 BTC from federation reserves.
Liquid held around 4,205 BTC before the incident. Prior to halting operations, reserves dropped to a low of 197 BTC. The attacker, describing themselves as a white hat, has returned 3,400 BTC, leaving about 598.5 BTC outstanding.
Liquid said no private keys were compromised and the exit anchor mechanism operated as intended. The network remains offline. Blockstream is preparing an emergency release of Elements v23.3.4 and is working to bring Liquid back online with 1:1 BTC reserve backing.
