Liquid's Bitcoin IOUs Are Fully Backed Again After $320 Million Exploit
Liquid restores full bitcoin backing after $320 million exploit
Every LBTC token on the Liquid Network is backed by a real bitcoin again, almost two months after a software bug let an attacker drain nearly all of the network's reserves. The Liquid Federation announced on X on Monday that reserves were "fully restored, reestablishing 1:1 BTC backing for all LBTC" after a final transfer of 250 BTC.
Liquid is a bitcoin sidechain, a separate network built to move bitcoin faster than the main Bitcoin network. Users lock bitcoin with a federation of firms led by Blockstream and receive LBTC in return. LBTC is a token meant to be redeemable for one bitcoin at any time.
Key points
- A software flaw on Sept. 6 let an attacker mint about 4,000 LBTC with nothing behind them and redeem them for real bitcoin.
- The bitcoin reserve fell from about 4,205 BTC to 197, according to Blockstream's incident report at the time.
- The attacker, who claimed to be a white hat, returned 3,400 BTC the next day, leaving about 600 BTC missing.
- The federation has not said who provided the final 600 BTC, worth more than $40 million, needed to close the gap.
How the reserves were restored
After the exploit, the attacker returned 3,400 bitcoin, but roughly 600 BTC were still missing. The final 250 BTC transfer announced on Monday closed that hole. The federation said anyone can check the balance on the network's public dashboard.
The federation did not disclose the source of the roughly 600 BTC used to fill the shortfall.
How users can swap and withdraw now
Users have been able to exchange bitcoin and LBTC at a one-to-one rate through providers like SideSwap since late October. Direct withdrawals from the federation still run under what it called "enhanced operational controls."
What the federation says comes next
The federation promised more details on governance changes "in the coming weeks."
Why this matters for LBTC users
LBTC is supposed to be redeemable for one bitcoin at any time, so the backing broke after the September attack. With reserves restored, every LBTC token again has a real bitcoin behind it, and users can swap at a 1:1 rate through providers like SideSwap.
Sources
Newisty Editorial Team covers technology, cryptocurrency, digital products, online platforms, developer tools and the wider digital economy. Our content is researched from official sources, company announcements, public documentation, market data and other primary or reputable sources. Articles are reviewed and edited before publication for clarity, accuracy and useful context.