Liquid hack explained.
Liquid has confidential transactions that hide the amounts for improved privacy. A bug in how these transactions are validated caused inflation of Liquid BTC (L-BTC) and allowed hackers to empty the entire side chain.
Liquid nodes don't see the amounts of a confidential transaction, so to make sure that the transaction is still valid and doesn't cause inflation nodes check something called a balance proof and a range proof.
The balance proof establish that sum of the input amounts equal the output amounts, i.e., that "x L-BTC going in and x L-BTC going out". But there's a catch. Only relying on a balance proof isn't enough. You also need the range proof.
The range proof establishes that a hidden output amount falls within a positive range. That means a valid output must be at least 1 L-sat and at most 2^64 − 1 L-sats. Range proofs make sure that you can't mint "negative L-BTC".
Why is this even necessary? Remember, the amounts are hidden and a hidden negative amount would allow extra positive outputs to balance against it. Without a range proof, a transaction could say "I've put 1 L-BTC in, and I'm taking two outputs out: one with 4000 L-BTC and one with -3999 L-BTC)."
This is going to cause a disaster in a little bit.
Once the balance proof, the range proof, and other validations pass, a transaction is regarded as valid and can pass consensus. However, because especially the range proof is computationally expensive, Liquid nodes cache the result of a successful range proof in memory. Essentially, the node remembers "I saw this range proof before and it was valid, all good!".
In order to recognize the same range proof later on, you need to assign a label to it. This is called a cache key. This cache key is the actual cause of the bug.
The way this cache key was constructed allowed two different transactions to collide on their cache key. Essentially, one valid transaction (1 L-BTC in, 1 L-BTC out) had the same cache key as an invalid transaction (1 L-BTC in, 4000 L-BTC out).
Here's the hack: the attackers submitted the valid transaction (1 L-BTC in, 1 L-BTC out) first. Liquid nodes verified this transaction successfully, created a cache key called REKT and stored it in their cache. Then the attackers carefully crafted a second invalid transaction with (1 L-BTC in, 4000 L-BTC out) that created the same cache key REKT.
Instead of validating the second transaction and realizing that it printed money out of thin air, Liquid nodes found it in their cache and said "hey I saw this transaction before, everything is fine" and that caused the inflation.
The attackers then took their 4000 L-BTC and withdrew 4000 BTC onto the Bitcoin base chain.
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Replies (53)
Happy to voice this one for the thread if folks want it — the audio drops once the 500 sats bounty is met here, one zap or many.
👀🤙
Is this another simple form of double spending?🤣
Reminds me of mtgox drain?
GET REKT ... Obviously
The Liquid exploit highlights how privacy features can introduce unexpected attack vectors—similar to how sanctions evasion tech can backfire. I was just reading about North Korea's missile timeline; their reliance on opaque financial networks mirrors this trade-off between secrecy and security.


The Board
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Nice... 1 in - 4000 out... Looks legit! 😅
👏🏻
flaw in the database logic. sounds like injection
How likely is it that we may have a similar bug on LN? #asknostr
I thought you Red Team guys got everything in Bitcoin covered 🤡
Great time friend, to check the security of the CASHU network 🥜🔐
the jokes are writing themselves
Is LBTC Bitcoin though?
Damn! Spot on! Here, have a follow!
How is the cache key crafted? Is it not a cryptographicly secure hash?
But yeah, let's just keep adding "features" (read as: points of vulnerability) to Bitcoin. 🫠
Less is more you fucking Core idiots. 🤙
Very good point. I also remember the Monero only bros dismissing Bitcoin because of the lack of confidential txs. I like Monero but I wonder what's next.
So the cache key has a crappy hash? What exactly did it use?
you are not technical enough to understand, everything is under control. 🤣
Sounds like a shitcoin
Flew right above my head. It's easy to stick to Bitcoin and lightning.
Liquid has zero users and merchant adoption, how does it has 4000 BTC? I will never know
So a bug fix would be a consensus change and a fork right?
Lightning is still 10x more complex.
I'm actually surprised there hasn't been a flurry of attacks and bug finds constantly coming out for lightning non stop.
Reservedly impressed honestly.
🤣 They forgot to add claude, make no mistakes
The two transactions with the same cache key, we're they carefully crafted in order to result in the same key or this could happen also by accident?
Great explanation! THX
Good summary. If you want the juicy details:
View quoted note →
The one question that matters in that thread is how the cache key is built. A cache is only safe if its key commits to everything that affects validity: the proof bytes, the asset ID, the validation flags. Leave one input out of the hash and you get a collision, so a transaction validated in context A gets marked valid in context B where it is not. That is the root cause pattern in nearly every cached-validation exploit. Never cache an expensive check keyed by less than its full input.
red team is just mossad theatre
What the helly
Wait. Doesn’t make any sense, how can 2 different transactions use the same “cache” key? That is stupid!
I hope the hackers keep the BTC, well deserved.
Fuck Blockstream and Andy - Bitcoin suffered long enough.
What a summer.
Irony: private chain inflates, yet public fiat prints $8T daily without audit. Fed’s opacity is structural, not a bug. Fiat’s terminal flaw isn’t code, it’s the infinite issuer.
When did you or the 'Red Team' first find this vulnerability Calle?
🎯
😂
Nice excuse 🤡
nah, fuck you @Chuck Langstrumpf
Adam Back is a good person. Blockstream is good also. Now shut the fuck up Chucky and go back to your bip110blake2b retard camp
This re-enforces and just proves further that bitcoin is secure.
With the inflation bug that was exploited in monero and now liquid, also rumored zcash in the past; the theme is that confidential transactions introduce complexity and a large attack surface for exploitation. What many said was one of Bitcoins flaws (lack of onchain privacy) actually is its strength. The trade-off of going without confidential transactions onchain, in exchange for solid transparency and security.
Privacy can still be achieved via coin control, coinjoin, payjoin, coinswap, lightning. This liquid hack only proves further how secure Bitcoin really is. Bitcoin does not use confidential transactions which resulted in hacks of things which do like monero, Liquid, (zcash?). I was a fan of liquid network, though going forward I lack confidence in confidential transactions on anything.
“I survived Summer ‘26!”


@The ₿itcoin Artist straight to printing!🤘
Liquid hack once again proves that if its not bitcoin, its crap!!
View quoted note →
Best note I've seen this month, ty!
Appreciate the explanations, thank you.
lol :)
So that is not a possible exploit in a cashu ecash mint?
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Since animated films attract significant public interest today and we intend to undertake international animation projects, the animation film production sector will generate substantial revenue for us.
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How will revenue be generated, and how will we increase our audience?
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We will increase the 185,000 US dollars you have lent to our holding company by utilizing it in the animated film production sector, and I will return the funds to you as 370,000 US dollars on April 30, 2027.
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You will have generated twice as much revenue within a few months.
I will repay you the 185,000 US dollars you lent to our holding company as 370,000 US dollars when the date of April 30, 2027, arrives.
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Send us a message via Telegram, Signal, or email for detailed information.
I have listed our contact details below; you can obtain detailed information by sending a message to any of them.
To learn how you can lend 185,000 US dollars to our holding and to get detailed information about our animated film project, send a message to my Telegram username, Signal contact number, or email address below, and I will provide you with detailed information.
To learn how you can further increase your money within a few months by investing 185,000 US dollars in our holding and to get detailed information about our animated film production project, send a message to my telegram username, signal username, or email address below.
To learn how you can increase your money, send a message to my Telegram username, Signal contact number, or email address below.
My Telegram username:
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Signal contact number:
+447842572711
Signal username:
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fake cookie hack
One of them actually was rejected