Liquid Network Resumes Operations With L-BTC Redemptions Still Suspended

Liquid Network has resumed block production and transactions, but users still cannot redeem Liquid Bitcoin (L-BTC) for Bitcoin (BTC) as about 603 BTC remains missing from the network’s reserve.

Liquid requires the reserve to fully cover all circulating L-BTC and its security review to be completed before peg-outs — conversions from L-BTC back to BTC — can resume. The suspension was still in place as of Oct. 11.

The incident began Sept. 6 when a vulnerability in Elements software enabled unauthorized creation and redemption of L-BTC. About 3,996 to 4,000 BTC left the federation reserve, which held roughly 4,205 BTC before falling as low as 197 BTC.

A self-described white-hat actor returned about 3,400 BTC on Sept. 7, leaving an estimated 598 to 603 BTC unreturned. The federation’s signing keys and SideSwap’s Peg-out Authorization Key were not compromised.

Liquid restored block production and transactions on Sept. 10 after requiring an Elements upgrade, a security audit and a shift to cold-storage key management. USDT and tokenized real-world assets on the network were not affected. No date has been given for the return of L-BTC redemptions.