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Liquid Network Bitcoin exploit and redemption freeze

Updated 2 times since CLSTR started tracking revisions of this situation.

What changed

2026-10-13 02:41 UTC → 2026-10-20 22:14 UTC · added removed

On September 6, 2026, a software vulnerability in the Elements software allowed attackers to exploit the Liquid Network, enabling the unauthorized creation of L-BTC tokens without sufficient Bitcoin backing. This resulted in the unauthorized withdrawal of nearly 4,000 BTC. Thirty-five days after the exploit, redemptions of L-BTC for on-chain Bitcoin remain suspended. While approximately 3,400 BTC were returned by actors identifying as ‘white-hat hackers’, a deficit of roughly 600 BTC remains, valued at approximately $49.69 million. The attackers have refused to release these remaining funds unless Blockstream pays a 10% reward, a proposal that Blockstream has rejected. As a result, the network’s reserves currently cover only about 86% of the L-BTC in circulation. Although internal transactions and block production resumed on September 10, By October 20, 2026, the peg-out function remains frozen. Redemptions will stay suspended until Liquid Network announced it is entering the final stages of recovery. The network has reactivated swaps between L-BTC and Bitcoin through participating providers. However, full 1:1 reserve Bitcoin backing has not yet been restored, which is required before direct peg-outs to the Bitcoin network can be fully restored, reactivated for authorized key holders. While Blockstream negotiated the return of most funds, critics have noted that the attackers retained roughly 15% of the stolen assets. Redemptions remain contingent upon reestablishing complete reserves, implementing software upgrades are implemented, upgrades, and completing an independent security audit of Elements v23.3 is completed. v23.3.

Versions

  1. 2026-10-20 22:14 UTC Liquid Network Bitcoin exploit and redemption freeze
  2. 2026-10-13 02:41 UTC Liquid Network Bitcoin exploit and redemption freeze
  3. 2026-10-11 16:32 UTC Liquid Network Bitcoin exploit and redemption freeze

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