Liquid Network’s bitcoin redemptions remained suspended on October 11, 2026, 35 days after an exploit drained its reserves. Transfers were working again, but holders still could not redeem L-BTC for bitcoin: reserves covered about 85.8% of the outstanding tokens.
Key takeaways
- Liquid’s reserve deficit stood at approximately 602.53 BTC.
- Transfers resumed on September 10, 2026; bitcoin withdrawals remained frozen.
- Reopening requires full backing, software upgrades and completed security reviews.
Per quanto riportato da The Defiant, on October 11, 2026 the Liquid explorer run by Mempool showed federation reserves holding 3,632.23 BTC while 4,234.76 L-BTC remained in circulation. The report calculated the resulting shortfall at about 602.53 BTC.
Liquid Network’s bitcoin redemptions await full backing
Liquid requires one bitcoin in reserve for every L-BTC before restoring redemptions, known as peg-outs. Software updates, testing and independent security reviews must also be complete.
The Bitcoin sidechain uses a federation whose members jointly control the reserve through multisig. Users lock bitcoin with that federation and receive L-BTC, designed for one-for-one redemption.
Normal block production and user transactions restarted on September 10, 2026, allowing holders to send and receive L-BTC within the network. That restoration did not reopen Liquid Network’s bitcoin redemptions.
Crypto Briefing reported that approximately 3,996 to 4,000 BTC, worth around $320 million at the time, left the reserve during the exploit. It put holdings before the drain at roughly 4,205 BTC and their crisis low at 197 BTC. Other assets issued on Liquid, including USDT and tokenized real-world assets, were not disrupted and returned to normal operations.
Elements validation failure addressed in software alongside key updates
Blockstream’s September 23, 2026 incident assessment traced the exploit to a validation failure in Elements’ cache of previously verified cryptographic proofs. The September 6, 2026 attack caused the software to accept an invalid transaction, creating roughly 4,000 unbacked L-BTC.
Those tokens were redeemed for bitcoin through the standard peg-out process via federation member SideSwap. Blockstream said that process trusted the sidechain’s validated state instead of performing a separate reserve check.
The Elements v23.3.4 release strengthens the range-proof cache keys and provides an option to disable the cache. Liquid’s September 29, 2026 update said an independent external security audit of that release was underway to help validate the safe restoration of peg-outs.
The federation was also replacing entries in its peg-out authorization key list and securing peg-out keys in cold storage. The corroborating report said neither federation members’ signing keys nor SideSwap’s Peg-out Authorization Key had been compromised.
Asset recovery continues without ransom payments
On September 7, 2026, roughly 3,400 BTC was returned, though Blockstream’s incident assessment indicated that around 602 BTC remained subject to ongoing recovery efforts. The corroborating report attributed the returned funds to white-hat actors.
Blockstream CEO Adam Back assured stakeholders that the one-for-one peg would ultimately be covered, according to the corroborating report. Full reserve backing remains a condition for reopening withdrawals, alongside the technical safeguards.
“Blockstream will not pay a ransom for the return of stolen funds,” the company said on September 11, 2026. The company stated it would collaborate with law enforcement agencies, exchanges and forensic experts in an effort to trace and recover the funds.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.
Powered by WPeMatico
