Hassan Maishera
TL;DR
-
Liquid Network has restored full 1:1 Bitcoin backing for all LBTC tokens, nearly two months after a $320 million security exploit.
-
The September 6 attack resulted in approximately 4,000 BTC being withdrawn, although the attacker returned around 3,400 BTC the following day.
-
Blockstream reportedly supplied the remaining Bitcoin needed to close the reserve shortfall, including 550 BTC deposited in late October and early November.
-
The exploit stemmed from a software vulnerability in Elements that allowed the creation of approximately 4,000 unbacked LBTC without compromising network operators' private keys.
Liquid Network has restored full Bitcoin backing for its LBTC tokens, nearly two months after a security vulnerability allowed an attacker to withdraw approximately $320 million worth of BTC from the Bitcoin sidechain.
The Liquid Federation confirmed on Tuesday that its reserves once again provide 1:1 backing for all LBTC in circulation, marking a significant milestone in the network's recovery from the September 6 exploit.
The restoration follows a series of Bitcoin deposits reportedly made by Blockstream, which helped cover the remaining shortfall after the attacker returned most of the stolen funds.
Although users have been able to exchange BTC and LBTC through participating service providers for several weeks, some direct Federation withdrawal services have remained subject to additional security checks.
Liquid Network Restores 1:1 Bitcoin Backing After September Hack
Liquid Network has completed the replenishment of its Bitcoin reserves following one of the most significant security incidents in its history.
According to an announcement from the Liquid Federation, the sidechain now holds sufficient Bitcoin to back every LBTC token in circulation on a one-to-one basis.
Update from the Liquid Federation: The Liquid Federation is pleased to announce that the network’s bitcoin reserves have been fully restored, reestablishing 1:1 BTC backing for all LBTC. This follows the restoration of BTC<>LBTC swaps several weeks ago, which have since allowed users to move between Bitcoin and Liquid at a 1:1 rate through participating swap providers. Together, these milestones represent significant progress in the Federation’s recovery efforts and reaffirm its commitment to the long-term security, stability and resilience of the Liquid Network. As always, the network’s bitcoin reserves are independently verifiable. Users operating their own Liquid nodes can directly verify the Federation’s Proof of Reserves, while reserve balances and network activity can be monitored through the public dashboard at https://t.co/M46Zhn8nlY. We extend our sincere appreciation to the Bitcoin community, Liquid users, and ecosystem partners for their patience, understanding, and continued engagement throughout the recovery process. Your support and involvement has been instrumental as we worked to restore the network’s reserves and strengthen its underlying infrastructure. Strengthening the Liquid Network for the Future Looking ahead, the Federation is advancing several important initiatives designed to strengthen the network’s long-term security, governance, and operational resilience. These efforts include modernizing the governance structure, introducing clearer responsibilities and oversight, and implementing additional technical and operational safeguards to further protect the network and its participants. More details on these initiatives and the Federation’s next steps will be shared in the coming weeks. Restoring full bitcoin backing marks an important milestone, but our work continues. The Federation remains committed to building on the progress of recent years, advancing Liquid’s development, and strengthening the network’s resilience and accessibility for all participants.
— Liquid Network 🌊 (@Liquid_BTC) November 3, 2026
LBTC is Liquid Network's Bitcoin-pegged asset, designed to represent BTC held in the network's Federation-controlled reserves.
The sidechain allows users and financial service providers to transfer Bitcoin-linked value while accessing features such as confidential transactions and asset issuance.
That relationship was disrupted on September 6 when an attacker exploited a software vulnerability and withdrew approximately 4,000 BTC, worth around $320 million at the time.
The incident prompted an emergency response from Liquid's developers and Federation members, including restrictions on certain network operations.
Although most of the Bitcoin was returned shortly afterward, a substantial reserve deficit remained.
Blockstream Deposits Bitcoin to Cover Remaining Reserve Shortfall
On October 28, Liquid Federation board member and former Blockstream executive Samson Mow reported that 50 BTC had been deposited into the Federation wallet.
That transaction reduced the outstanding shortfall to approximately 550 BTC. Further deposits followed on Monday, November 2.
According to Mow, an additional 300 BTC was transferred into the Federation wallet, followed by another 250 BTC later the same day.
Together, those transactions eliminated the remaining deficit and restored full backing for LBTC. Mow subsequently identified Blockstream as the source of the funds in a post on X.
“But where are the coins coming from??” As stated many times, Blockstream.
— Samson Mow (@Excellion) November 2, 2026
