Liquid Network resumes after $320M hack as 3400 BTC returns – What next?

After the $320 million hack, which shook the crypto community, Liquid Network has largely returned to normal operations. However, one of the main functions, which involved converting LBTC back into Bitcoin [BTC] through peg-outs, is still suspended.

But the good news here is that block production and regular transactions have been running normally since 10th September. This recovery has given users the second chance to move LBTC across the network.

With the step-by-step recovery process, users can now use exchanges, wallets, and other ecosystem services for their liquid-related functions. However, the caution bubble still remains, as not all the Bitcoin involved in the incident has been recovered.

Services resumed after the recovey processes

According to the 17th September update, several liquid ecosystem services have resumed activity. Mifiel, for example, has resumed issuing and processing its digital promissory notes, with its batches giving normal confirmation.

Aqua has also restored liquid asset transfers and peg-ins. Moreover, Aqua’s new Indra swap feature is now allowing users to swap between LBTC and Bitcoin on the Lightning Network, although liquidity is currently limited.

This along with other wallet providers are also making a comeback, but LBTC-related services that ultimately require a peg-out remain restricted. This makes sense because those routes require users to eventually move BTC out of Liquid.

Bitcoin recovery is slow but not weak

In other words, everything boils down to Bitcoin recovery. So, for those unaware, during the the 6th September incident, roughly 4,000 BTC was withdrawn.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.

What’s notable in this recovery milestone is that the technical root cause of the exploit has now been identified. The exploit path has been decoded, and an immediate fix has already been released through Elements v23.3.4, the software underlying Liquid. 

All in all, it can be said that 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.

Final Summary

• The exploit resulted in 95% of its Federation peg wallet being withdrawn in a single transaction.
• Block production and regular transactions have been running normally since 10th September.