Liquid Network enters final recovery stage after Bitcoin exploit

The Liquid Network, a Bitcoin sidechain developed by Blockstream, has announced it is entering the final stages of recovery following a major exploit in September. The network has reactivated swaps between L-BTC and Bitcoin through participating providers, according to an official update.

However, the network has not yet restored its full 1:1 Bitcoin backing. The recovery process requires reestablishing complete reserves before direct peg-outs to the Bitcoin network can be fully reactivated for authorized key holders.

The incident began on September 6, when attackers exploited a consensus flaw in the Elements software to create approximately 4,000 unbacked L-BTC. These tokens were subsequently exchanged for real Bitcoin via the SideSwap peg-out service. While Blockstream successfully negotiated the return of most funds, a deficit of approximately 602 BTC remains. Although the attackers identified themselves as ‘white hat’ hackers, critics have noted they retained roughly 15% of the stolen assets.