Samson Mow, who sits on the Liquid Federation board, noted that Blockstream supplied the missing bitcoin after a September security breach left nearly 600 BTC unreturned.
The Liquid Federation stated on Tuesday that the sidechain’s bitcoin holdings have recovered complete 1:1 backing across all LBTC, roughly two months following an attack where close to $320 million in bitcoin was drained from the platform.
Participants have been able to exchange Bitcoin (BTC) and LBTC through cooperating service providers for several weeks now. Direct Federation peg-outs were previously paused pending extra safety evaluations, though certain semi-automated peg-outs have since been reactivated. Tuesday’s statement did not specify whether the remaining limitations had been removed. Reserve numbers are publicly available at liquid.network, where operators of Liquid nodes can also independently confirm the backing.
“We express our deepest gratitude to the Bitcoin community, Liquid participants, and ecosystem partners for their steadfast patience, understanding, and engagement throughout this recovery journey,” the Liquid Federation remarked. “Your backing and participation have proved essential as we worked to rebuild the network reserves and reinforce its core infrastructure.”
Roughly 4,000 BTC was extracted from the Liquid Federation wallet during the September 6 incident. The perpetrator returned about 3,400 BTC the following day after Blockstream, the development firm behind the technology powering the Liquid Network, fixed the impacted bridge nodes, but kept roughly 600 BTC. Blockstream, led by Adam Back, later turned down the hacker’s request for a 10% bug reward in exchange for sending back the remaining coins.
“We refuse to establish a precedent where open-source software built for the benefit of the Bitcoin community exposes its creators to paying a ransom far exceeding their financial involvement,” Blockstream stated at the time.
Blockstream’s bitcoin deposits close reserve gap
Samson Mow, a board member of the Liquid Federation and former executive at Blockstream, noted that 50 BTC was deposited into the Federation wallet on October 28, leaving 550 BTC unaccounted for. An additional 300 BTC arrived on Monday, followed by another 250 BTC later that day, restoring reserves to full capacity. When questioned about the origin of the bitcoin on X, Mow pointed to Blockstream. “As mentioned repeatedly, Blockstream,” he posted.
The September incident report from Liquid traced the exploit to a vulnerability involving cached range proof validations within Elements, the underlying software powering the Liquid Network. The attacker managed to generate approximately 4,000 unbacked LBTC, which were subsequently utilized to withdraw bitcoin through the Liquid Network wallet and trading platform SideSwap, a Federation participant holding a peg-out authorization key. Liquid clarified that its network operators experienced no breaches and no private keys were compromised.
Elements v23.3.4 rolled out on September 9 to patch the security flaw. The Liquid Network recommenced block production later that same day, with user transactions coming back online on September 10, though Federation peg-outs remained offline at that point.
In its newest update, the Federation announced it is preparing updates regarding governance and oversight, along with extra technical and operational safety measures. Further specifics are anticipated to be released in the upcoming weeks.
Originally published at https://www.theblock.co/news/ecosystems/2026-11-03-liquid-network-restores-full-bitcoin-backing-following-exploit-432387.
