For holders of Liquid Bitcoin (LBTC), restored reserves and access to withdrawals are separate questions. The Liquid Federation said on Nov. 3, 2026, that bitcoin reserves once again fully backed all LBTC at a 1:1 ratio. Its announcement did not clarify whether the remaining restrictions on direct Federation peg-outs had been lifted.
The update came nearly two months after a Sept. 6 exploit in which approximately 4,000 BTC—valued in the report at about $320 million—was withdrawn from the network.
How the reserve gap was closed
According to The Block’s report, the attacker returned roughly 3,400 BTC the day after the exploit, after Blockstream patched the affected bridge nodes. About 600 BTC remained withheld. Blockstream, the developer of Liquid’s underlying technology, subsequently rejected the attacker’s demand for a 10% bug bounty in exchange for returning the remaining coins.
Liquid Federation board member and former Blockstream executive Samson Mow reported the deposits that closed the gap:
- Oct. 28: A 50 BTC deposit left 550 BTC outstanding.
- Monday, before the Nov. 3 announcement: Another 300 BTC arrived, followed by 250 BTC later that day, restoring full backing.
Mow identified Blockstream as the source of the replenishment funds.
What failed—and what Liquid said was not compromised
Liquid’s September incident report traced the exploit to a bug involving cached range-proof verifications in Elements, the software underlying the network. The attacker created approximately 4,000 unbacked LBTC and used them to withdraw bitcoin through SideSwap, a wallet and trading platform that is also a Federation member with a peg-out authorization key.
Liquid said its network operators were not hacked and no keys were compromised. That distinction matters: the reported failure involved software verification, rather than stolen operator keys.
Elements v23.3.4 was released on Sept. 9 to address the vulnerability. Liquid resumed block production later that day, and user transactions returned on Sept. 10. Federation peg-outs remained disabled at that stage.
What holders could verify at the time
By the Nov. 3 report, users had been able to swap BTC and LBTC through participating providers for several weeks. Some semi-automated peg-outs had also resumed, but direct Federation peg-outs had previously been restricted pending additional security checks. The latest announcement left the status of the remaining restrictions unresolved.
The Federation said reserve balances were published at liquid.network and could also be independently verified by Liquid node operators. For holders assessing access to their bitcoin, the practical distinction is between verifying reserve backing and confirming which withdrawal route is available; the announcement established the former without fully clarifying the latter.
The Federation also said it was preparing governance and oversight changes, along with additional technical and operational safeguards. At the time of publication, it expected to provide further details in the coming weeks.
Original reporting published Nov. 3, 2026, at 19:48:18 UTC+08:00. Source: The Block.