A white hat hacker minted 4000 fake LBTC that nearly drained Liquid’s entire Bitcoin reserve
Full breakdown below:
"Users deposit Bitcoin into a federation controlled wallet, and they receive LBTC to use on Liquid. So effectively, you have LBTC that's backed by BTC one for one, and then you can go use LBTC to earn yield and do other things."
"A purported white hat hacker exploited a bug in Element, which is the software underlying Liquid. That bug allowed approximately 4000 LBTC to be created without depositing any actual BTC."
"The attacker sent the fake 4,000 LBTC to something called Sideswap for the normal withdrawal process. And the LBTC was burned and the Liquid Federation released nearly 4,000 genuine Bitcoin, which is approximately 95% of Liquid's reported Bitcoin reserves."
"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."
"Is there no human being that sees, oh, 4,000 of the 4,200 Bitcoin that we have total are being withdrawn.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 oversight on what are the best and most famous protocols that we have."
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