TheBlock
Liquid's reserves are back to 1:1 backing for all LBTC, nearly two months after an exploit saw approximately $320 million in bitcoin withdrawn from the network. The Liquid Federation said the final reserve deposits arrived Monday: Blockstream supplied 300 BTC, followed by another 250 BTC, closing the remaining 550 BTC gap.
Why it matters
The September exploit involved about 4,000 BTC taken from Liquid's Federation wallet. The attacker returned roughly 3,400 BTC the next day after Blockstream patched affected bridge nodes, but kept about 600 BTC. Blockstream later rejected the attacker's demand for a 10% bug bounty in exchange for returning the rest.
Liquid's incident report traced the exploit to a bug in cached range-proof verifications in Elements, the software underlying the network. The attacker created approximately 4,000 unbacked LBTC and used them to withdraw bitcoin through SideSwap. Liquid said network operators were not hacked and no keys were compromised. Elements v23.3.4 was released to address the vulnerability.
Market impact
Users had already been able to swap BTC and LBTC through participating providers for several weeks. Some semi-automated peg-outs had resumed, but the Federation's announcement did not say whether restrictions on direct peg-outs had been lifted. Reserve balances are published on Liquid's website, and node operators can verify backing independently.
The Federation said it is preparing governance and oversight changes alongside additional technical and operational safeguards, with further details expected in the coming weeks. Full backing addresses the immediate reserve shortfall; the status of direct peg-outs and the planned safeguards remain important developments for Liquid users.
Frequently asked questions
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How much bitcoin was taken in the Liquid exploit?
About 4,000 BTC was taken from Liquid's Federation wallet. The incident involved approximately $320 million in bitcoin.
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How did Liquid restore full backing for LBTC?
Blockstream supplied the final 550 BTC in deposits on Monday, closing the remaining reserve gap and restoring 1:1 backing for all LBTC.
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What caused the Liquid Network exploit?
Liquid's incident report traced it to a bug involving cached range-proof verifications in Elements, the software underlying the network.
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Have direct Liquid peg-outs fully resumed?
The Federation did not say whether restrictions on direct peg-outs had been lifted. Some semi-automated peg-outs had resumed, and users could swap BTC and LBTC through participating providers.
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What changes is the Liquid Federation preparing?
The Federation said it is preparing governance and oversight changes, along with additional technical and operational safeguards. It expects to share more details in the coming weeks.
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