Nearly two months following a software vulnerability that permitted a hacker to deplete the majority of its reserves, the Liquid Federation announced that complete bitcoin backing has been reinstated for all LBTC tokens.
While the malicious actor gave back 3,400 bitcoin following the exploit of the vulnerability, the collective did not reveal where the roughly 600 bitcoin required to cover the rest of the deficit came from.
Participants are able to swap bitcoin for LBTC at a one-to-one ratio via services such as SideSwap, whereas withdrawals directly through the federation continue to face heightened restrictions.
Every single LBTC token circulating on the Liquid Network is once more supported by actual bitcoin, nearly eight weeks after a programming error enabled a hacker to sweep away nearly all of the assets.
Operating as a Bitcoin sidechain managed by a collective of companies spearheaded by Blockstream, Liquid is utilized by trading platforms and speculators to transfer bitcoin at speeds exceeding the primary blockchain’s capabilities. Participants deposit BTC with the federation and receive LBTC in exchange, a cryptographic asset designed to be exchangeable for an authentic bitcoin on demand.
That reserve support shattered on September 6th. A flaw within the Liquid software allowed an unauthorized user to generate roughly 4,000 LBTC out of thin air and trade them in for genuine bitcoin.
Data from Blockstream’s incident report at that moment showed the bitcoin holdings plunged from approximately 4,205 BTC down to 197. The hacker, who asserted they acted as a white-hat security researcher, sent back 3,400 BTC on the following day, which still left an absence of around 600 BTC.
That gap has presently been eliminated. On Monday, the Liquid Federation said on X that holdings were completely repaired, re-establishing a one-to-one BTC backing for every LBTC token, following a concluding transfer of 250 BTC. The organization noted that any individual is free to verify the holdings via the public network dashboard.
Originally published at https://www.coindesk.com/markets/2026/11/03/liquid-s-bitcoin-ious-are-fully-backed-again-after-a-usd320-million-exploit.
