The Liquid Federation said Tuesday that the Bitcoin sidechain’s reserves once again fully back all L-BTC 1:1, nearly two months after an exploit drained about $320 million in bitcoin from the network. Reserve balances are published on liquid.network, where node operators can verify the backing themselves.
The final top-up came from the network’s developer. Another 300 BTC landed on Monday and 250 BTC later that day, restoring full backing. Blockstream was identified as the source of the funds. That 550 BTC closed the hole left by the attackers. They returned 3,400 BTC shortly after the incident but kept roughly 598.5 BTC, worth about $47 million at the time. Blockstream had refused to pay a ransom for those coins.
The incident began on Sept. 6, when unknown actors withdrew roughly 4,000 BTC from the federation wallet, draining nearly 95% of reserves, and Liquid halted all new transactions. Liquid’s September incident report traced the exploit to a bug involving cached range proof verifications in Elements, the software that runs the network. The flaw let the attackers mint unbacked tokens and withdraw the bitcoin.
Liquid is a Blockstream-built network that lets users move bitcoin-backed assets quickly, including swaps between stablecoins and bitcoin. Restored backing is the precondition for normal operation. Liquid has said the final phase of recovery means reestablishing full 1:1 backing, then reactivating federation peg-outs in a controlled way for authorized key holders.
Full backing removes the immediate solvency question for L-BTC holders. Liquid’s federated custody model, however, faces a harder test: winning back users and liquidity after one of the largest exploits in Bitcoin’s second-layer history.
