Crypto
Home›Crypto›Market Structure›AI traced Liquid’s $320M BTC sidechain exploit in abou…
AI traced Liquid’s $320M BTC sidechain exploit in about an hour
Alpen Labs said a cache verification flaw allowed invalid L-BTC to be accepted, and later Elements fixes changed cache keys and added tests to address the issue.
Liquid’s federation released about 3,996 BTC on September 6, 2026, after its network accepted L-BTC that lacked Bitcoin backing, turning a validly authorized withdrawal into a real Bitcoin payment worth roughly $320 million at the time, according to CryptoSlate.
CryptoSlate reports that Alpen Labs CEO Simanta Gautam said his AI agents traced the flaw and reproduced the underlying behavior locally in about an hour after he learned of the attack. Alpen’s account and technical report describe a failed proof check linked to how Liquid’s Elements software caches successful cryptographic proof verifications for confidential transactions.
The issue, as described by Alpen, involves caching of cryptographic checks: a cached result could be reused in a way that bypassed the proof check that should have rejected an invalid target, even though different verification requests produced identical cache input bytes. Alpen also said a September 1 code change to make cached results depend on verification context concatenated fields without encoding boundaries, allowing different seeds and targets to collide in the cache input.
CryptoSlate added that SideSwap said a private security build on its node in August accepted the attack transaction, narrowing when at least one operator’s deployment was vulnerable but not identifying all federation functionaries’ versions. After the incident, Elements repair updates on September 8 changed cache keys to encode field lengths, added collision-focused tests, and introduced an option to bypass the range-proof cache, with version 23.3.4 following on September 9, to better enforce the validation gate before invalid L-BTC exits.
Latest closeBitcoin $83,833.56 ▼0.7%