Liquid Network Restores Full Bitcoin Backing Two Months After $320M Exploit

The Liquid Federation says it has restored one-to-one bitcoin backing for every LBTC token on the Liquid Network, nearly two months after a September exploit depleted the sidechain’s reserves. On 6 September, an attacker used a flaw in the Elements software to create roughly 4,000 LBTC without depositing the equivalent bitcoin, then withdrew about 4,000 BTC, worth around $320 million at the time. The attacker returned 3,400 BTC the following day, leaving a substantial shortfall that has now been filled. Liquid says node operators can verify the reserve balance themselves.

The federation’s announcement did not identify who supplied the replacement bitcoin, although federation board member Samson Mow said Blockstream provided it. Users have been able to exchange BTC and LBTC at a one-to-one rate through participating providers for several weeks; direct withdrawals from the federation have remained subject to additional controls, and the latest announcement did not clearly say whether all restrictions had ended. Blockstream says it has patched the software flaw and strengthened other safeguards. The federation has also promised changes to governance and oversight, with further details expected in the coming weeks.