The Liquid Network has begun generating blocks again after an attack that involved withdrawing around $320 million worth of Bitcoin from the network’s federation wallet. However, the network has not yet resumed transactions or pegging processes due to ongoing recovery procedures.
According to an announcement by the Liquid Network on Thursday via the social media platform X, the generation of blocks has resumed but will be done without transactions for the time being. This has been done to give the network enough time to stabilize itself following the attack.
As per Liquid, the mandatory upgrades have also been implemented on all its functionary and bridge nodes. The functionary nodes of Liquid are currently signing and verifying the blocks, which is a crucial phase for the restoration process.
Even though block production is back on the blockchain network, users cannot perform any transactions as usual. Liquid has also stopped all the peg operations, including PAK-authorized peg-outs, as it tries to restore the reserves of Bitcoins used to back L-BTC.
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Liquid Network Deploys Emergency Elements Update
This fix comes after a software emergency update carried out by Liquid on Wednesday for Elements, which is the open-source software responsible for running the network.
The update, called Elements v23.3.4, has been rolled out with the intention of fixing a proof verification cache vulnerability linked to the problem. This fix ensures that the keys used in range proofs become more secure.
The vulnerability became critical for the whole process since the impacted L-BTC were associated with a problem with the software called Elements. As a result, the Liquid Network decided to suspend operations until all the issues were resolved.
Now the Liquid Network has not released any information about its plans to bring back the usual transactions. At the moment, its priorities are connected with the stability of the system.
Around 3,400 BTC Returned After Withdrawal
The story unfolded on Sept. 6 when Liquid suspended services after 4,000 BTC were siphoned off the federation wallet.
This amount of Bitcoin was worth about $320 million at that time, which comprised about 95% of the 4,200 BTC held in the wallet. This siphoning was done using L-BTC linked to the Elements vulnerability.
The people who conducted the operation termed themselves as white-hat hackers. Later on, Blockstream confirmed that the vulnerable bridge nodes had been fixed.
Around 3,400 BTC valued at about $270 million were subsequently recovered and returned to the network. This has brought down the total number of Bitcoin that was lost from the federation wallet.
As of Sept. 7, there were still about 598 BTC outstanding. According to today’s market value, this is approximately $46 million.
Liquid Recovery Efforts Continue
The resumption of block generation is an important milestone for Liquid; however, the network has not yet resumed its regular operations.
The temporary disabling of the transactions allows the team to observe the network while making sure that the newest software and node upgrades are functioning. The temporary suspensions of pegs will also give Liquid sufficient time to sort out the disparity in the BTC/L-BTC balances.
The future success of Liquid will be determined by the effective functioning of the improved infrastructure and restoring trust in the reserve and bridge mechanisms.
In any case, at the moment, the system is experiencing a controlled recovery, when blocks are produced but all user transactions and pegs are disabled.
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