Hackers drain 95% of Liquid Network’s Bitcoin resereve

• BTC-USD

Scott Melker discusses a hacker group withdrawing $320 million in <a href="https://xpertsstudio.com/usdjpy-breaks-as-bitcoin-pullback-warnings-build/” title=”USDJPY breaks as bitcoin pullback warnings build”>bitcoin (BTC-USD) from Liquid Network, nearly 95% of its bitcoin reserves.

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Bitcoin based Liquid Network says $320 million withdrawn and hack. This is going to be a Netflix movie at some point. So liquid is a block stream developed Bitcoin side chain for those of you who don’t know.

Blockstream is founded by Adam Back who many believe was Satoshi Nakamoto. We are talking about the OGs of OGs of Bitcoin, definitely the high priests of this asset class, those who should understand security better than anyone else.

And once again, oops, you got some explaining to do. Right? What happened here?

Gosh, I it’s so hard to even unpack all these things because it’s such nonsense. So, users deposit a Bitcoin into a federation controlled wallet and they receive LBC to use on liquid. So effectively, you have LBC that’s backed by LB, that’s backed by BTC one for one and then you can go use LBC to earn yield and do other things.

So, what happened here is a purported white hat, white hat hacker, so luckily this person was a white hat and communicated with them, exploited a bug in elements, which is the software underlying liquid. That bug allowed approximately 4,000 LBC to be created without depositing any actual BTC.

And then the attacker sent the fake 4,000 LBC to something called Side swap for the normal withdrawal process, and LBC was burned and the Liquid Federation released nearly 4,000 genuine Bitcoin, which is approximately 95% of liquids reported Bitcoin reserve. So first of all,

they were able to do this through a software exploit, they didn’t need to hack keys. It’s yet another novel way that a massive exploit has happened. But like even with all of that, is there no human being that sees, oh, 4,000 of the 4200 Bitcoin that we have total are being withdrawn? Maybe we should check on this?

How does this happen? I understand in a world of AI, how AI can find these exploits and can steal money. I don’t understand how there’s no human guarding the walls on some of the biggest and most famous protocols that we have.

So, like I said, this is a white hat hacker. So interestingly, they communicated through uh through signatures and messages on the Bitcoin network, doing nerd things.

And then these nerds uh sent back 3400 of the 4,000 Bitcoin back to the other nerds.

Uh, they kept 600 Bitcoin as a tip because they’re the good guys. 600 Bitcoin, it’s a lot, right? And Liquid Liquid still has not announced the full restoration of normal bridge uh operations.

I mean, this was effectively the blockchain version of printing counterfeit casino chips and successfully exchanging them for almost all the real money in the cashier’s cage. Like, take a bunch of chips from outside, bring them in and go take 95% of all the money in the casino.

That’s what happened here. So the good news is that the hacker says he’s a good guy. The bad news is that the good guy still has 600 Bitcoin. He doesn’t seem to want to give them back. I too would like to be a good guy.

Source: finance.yahoo.com