Liquid Network's bitcoin redemptions remain suspended 35 days after an exploit, with reserves covering about 85.8% of outstanding L-BTC. An external security audit is underway, but no reopening date has been given.
Liquid Network's bitcoin redemptions remained suspended on Oct. 11, 35 days after an exploit drained its reserves, with bitcoin holdings covering about 85.8% of outstanding L-BTC.
An Oct. 11 snapshot from Mempool's Liquid explorer showed 3,632.23 BTC in federation reserves against 4,234.76 L-BTC outstanding. That leaves a gap of about 602.53 BTC, according to The Defiant's calculation. Liquid is a sidechain whose L-BTC token is designed to be backed one-for-one by bitcoin.
Transfers resume, peg-outs do not
Liquid said transactions resumed on Sept. 10, but peg-outs, its bitcoin redemption mechanism, would restart only after full one-for-one backing was confirmed and software updates, testing and independent security reviews were complete. According to The Defiant, Liquid's published recovery plan gives no firm reopening date or commitment to fund the reserve gap.
The shortfall persists although 3,400 BTC was returned on Sept. 7. Bitcoin News reports the attackers retained 598.5 BTC, insisting that Blockstream owed them a 10% bounty. Blockstream rejected that claim and demanded the immediate return of the remaining bitcoin. The attacker's wallet holds bitcoin valued at $49.69 million, the outlet said.
Audit and key changes precede any reopening
In its Sept. 29 update, Liquid said an independent external security audit of Elements v23.3.4 was underway, calling it "an additional layer of validation" toward restoring peg-outs. The federation was also replacing entries in its peg-out authorization key list and ensuring the keys sit in cold storage.
According to Blockstream's assessment, the Sept. 6 exploit tricked Elements' cache of previously verified cryptographic proofs into accepting an invalid transaction, creating roughly 4,000 unbacked L-BTC. Those tokens were then converted into bitcoin through the standard peg-out process via federation member SideSwap.
Some holders have stopped waiting. One user said moving funds out cost ~5% in spread and fees across Sideswap and Sideshift.ai and took weeks because of thin liquidity.
Blockstream said on Sept. 11 that it will not pay a ransom for the return of the stolen funds.
Sources: The Defiant, Bitcoin News
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