Liquid Federation said late on Tuesday, November 3, that the Liquid network’s bitcoin reserves have been fully restored and every LBTC token is once again backed 1:1 by BTC. The hole left by the September exploit, worth about $320 million, has been closed, but it is not known who supplied the missing funds.
The announcement was posted on X by the Liquid Network account. According to the federation, bitcoin reserves have been fully restored, and the 1:1 backing of all LBTC tokens can be verified. The Blockstream account, the company leading the federation, repeated that anyone can check this on their own Liquid node.
What Liquid and LBTC are
Liquid is a bitcoin sidechain run by a federation of companies led by Blockstream. It is used mainly by exchanges and traders to move bitcoin faster than on the main network. A user locks BTC with the federation and receives LBTC, a token that is meant to be redeemable for one bitcoin at any time.
The September 6 attack
As CoinDesk reports, on September 6 a software bug allowed an attacker to issue around 4,000 unbacked LBTC and exchange them for real bitcoin. The reserve fell from about 4,205 BTC to 197 BTC, which CoinDesk attributes to a Blockstream report from that time. The attacker, who described themselves as a „white hat”, returned 3,400 BTC the following day. That left a shortfall of about 600 BTC.
According to CoinDesk, the final transfer of 250 BTC was used to close the gap. However, the federation did not say where the funds to cover the remaining roughly 600 BTC, worth more than $40 million, came from. As of publication, it has not disclosed who paid for it.
Withdrawals and security changes
Swapping BTC for LBTC at a 1:1 rate has been available since late October through providers such as SideSwap. Direct withdrawals from the federation are still processed under „enhanced operational controls”, as the announcement put it. The federation also promised details on changes to network governance „in the coming weeks”.
Blockstream co-founder Adam Back described three reinforced lines of defence on X: refreshed PAK keys held on cold hardware wallets, disabled proof validation caches (the bug was also fixed in nodes), and tightened consensus rules that block transactions when in doubt. He added that the network has undergone several audits, and that the lesson is to be cautious about patches suggested by AI.
What it means for users in Poland
For people holding LBTC, for example on exchanges or in wallets supporting Liquid, the key point is that the token is once again fully backed by bitcoin, and the 1:1 swap can be done through external providers. Direct withdrawals from the federation are still subject to additional checks, so they may be slower. Reserve status can be checked on the network’s public dashboard. Treat any „fund recovery” instructions sent by unknown people as a scam attempt, and use only the official Liquid and Blockstream accounts.
