It looks like the hackers have agreed to give back most of the Bitcoin stolen from this hack, but what do you think will happen after the return of funds?
Will the Liquid network return to normal with 1:1 peg in/out with BTC? Or will there be a rush for users to get out of Liquid when the gates open, possibly creating a situation where the BTC is less than parity?
It will maintain 1:1 parity with BTC54.8%
It will drop below BTC parity12.9%
It's not coming back.22.6%
Other (comment)9.7%
31 votes \ poll ended
It will be hard for liquid to gain its credibility back. From what I read the inflation bug was due to its confidential transactions design.
You really read it wrong.
It's about optimization in consensus code (last time we had an inflation bug in Bitcoin, it was also coming from exactly that type of code). This is not some cryptography bug, it is the code that tries to optimize how often the cryptography process is ran. So basically a workaround.
Think of it this way: if you calculate
13*11once, you can write down the outcome under the key (13*11) on a piece of paper together with the answer (143- nice semiprime, maybe someone can quantum-factor it.)Now, you would write on your paper:
1311 = 143this conflicts with another entry you make:
131*1, which also leads to1311as "key". So if instead of calculating you always look up first, you will have the answer that131*1 = 143.THAT, is what happened here (in a very simplified form). Not a problem with confidential transaction design, but with the implementation of the elements software to not have to do calculations all the time.
This is a huge difference because it means it's a software bug, not a design flaw.
The second alleged problem in this is that some peg-out custodian didn't follow the security rules around peg-out targets. If they would have followed the rules, they would have had the 4k BTC in their custody, checked "what an odd amount is this?" did some digging, especially after half the network dropped off and there never would have been an attack. It would have been a failed attack. I know it is painful, but please let's be open to there being a multi-faceted fuckup here.
In so many words yes. Indeed it is painful and I’m not trying to absolve anyone from making an error.
Just trying to understand what happened
You don't appreciate me taking the time to explain it? 😭🤣
I did. It’s a complex concept but the math equation makes sense how two different methods to arrive to the same answer and that answer rather wrong was validated by the peg out door keeper.
One of the things that I liked about how liquid was set up back in 20(17? 18?) was that they used security industry standards for the deployments and from what I could decipher, the processes.
If within a decade the processes get fucked through a peg-custodian that does not implement proper risk assessment in their process but literally yolos 4k BTC, then oh boy have some organizations fallen apart on the ops side.
The cache problem is bad, the process problem is gigantic. I know this will all be blamed on a FOSS software coder but you don't get security from code, ever. You get security from the whole, and process is almost always the most impactful thing.
A federation provides weak security if they will blindly sign and rely on the peg-out for the real security. What is the point of a white listed peg-out address in the first place?
EXACTLY MY POINT
Speaking about SideChains, I found really interested what Sergio Demian Lerner explained about Rootstock (rBTC). This problem on cache or other types are protected by a 36hs delay protection to peg out.
Dixit:
The problem is that Liquid is not a sidechain as defined in the original Sidechain paper..
Sidechains require proof-of-work. Rootstock forces a 36-hour delay for peg-outs, and that's good enough for the miners to stop mining Rootstock in case of a consensus failure.
Rootstock is actually an HSM-enforced drivechain plus a federation majority approval requirement.
Better than a drivechain and better than a federation.
Several systems monitor Rootstock 24/7. Would Rootstock miners respond? I can't assure it. But functionaries will certainly respond, and turn off their HSMs, which blocks any peg-out from being signed.
Interesting. Last time I personally spoke with Sergio (several years ago), I got the impression that he felt that the rootstock bridge was a bit of a concession because of some lacking script primitives on the Bitcoin side.
Did he change his mind about this? I can see how a system that you previously felt like not living up to the same timeliness that you see elsewhere is in the face of extreme adversity kind of a blessing. I think I'd like that as a metric too: safety first?
if they let it float, I don't think there's much appetite from arb traders to pick up discounted L-BTC and hope it closes the whole over time! Time for tether to sweep in and save the day
Maybe it will hold parity, but once trust is lost with a platform it is really hard to get back. I wouldn't be surprised if people don't rush to the exit.
I'm split between 1:1 parity or poof.
I'm gonna guess that there's discussion among the members about them putting back in 600 BTC from their own reserves to restore real 1:1 backing.
Interesting to see how it'll play out. Definitely a stain on liquid though. The bug was from 2019??
I don't think the functinaries are remunerated for being functiaries
I think it will keep its parity, but lose its liquidity