The keys worked. The signatures were valid. So what actually failed in the ~4,000 BTC Liquid incident?

I've spent the week trying to understand the Liquid incident beyond the "$320M hack" headline.

The part I find most interesting is that this apparently wasn't a federation key compromise.

The federation keys weren't reported stolen. SideSwap says its PAK wasn't compromised. Yet roughly 4,000 unbacked L-BTC were created and eventually resulted in real BTC leaving the federation wallet through a valid peg-out path.

That changes the security question completely.

A multisig can protect against unauthorized signing.

But what happens when authorized signers are operating on state that the software incorrectly considers valid?

I dug into the Elements 23.3.4 changes, range-proof verification caching, SideSwap's role in the peg-out, the federation model and the distinction between Bitcoin consensus and Liquid's additional assumptions.

I also tried to separate what Liquid has officially confirmed from what independent researchers have reconstructed so far.

Full analysis:

Bitcoin Didn't Break. Everything Around It Keeps Reminding Us Why Bitcoin Exists

I'm particularly interested in technical criticism of the analysis.

If you've been following the Elements commits or have a better understanding of the cache failure, I'd like to hear it.