Liquid Network Restores Full Bitcoin Backing After September Exploit

The final phase of the recovery concluded on November 2, when a 250 BTC transfer pushed total reserves to approximately 4,269 BTC, matching the circulating supply of LBTC. This recovery process followed a September 6 attack on the Elements open-source software, which allowed an unauthorized actor to mint tokens without collateral. Although the attacker returned 3,400 BTC shortly after the breach, a shortfall of roughly 602 BTC persisted until late October.

Samson Mow, a member of the Liquid Federation board, identified Blockstream as the primary source of the replacement funds. Despite this, the federation has yet to provide a transparent breakdown of the contributions, leaving the precise origin of the final deposits unverified. SideSwap, a key federation member, currently handles BTC/LBTC swaps using its own liquidity, though the service operates with manual replenishment and potential queues for users.

The federation is now pivoting toward governance reform and technical overhauls to address the security failure. Developers have already deployed Elements v23.3.4 to patch the transaction verification flaw, and the group intends to announce further operational safeguards in the coming weeks. For now, users must navigate restricted withdrawal channels while the network undergoes its post-incident transition.