Eleven days after hackers extracted nearly 4,000 BTC from the Liquid Network on September 6, L-BTC to BTC peg-outs remain non-functional despite the return of approximately 85% of the stolen funds. The attackers continue to hold 598.50 BTC valued at more than $45 million.
Blockstream, the maintainer of the Liquid Network, has refused to pay for the remaining bitcoin and demands its return. The protocol shows a reserve shortfall, with 4,234.76 L-BTC in circulation against only 3,632.23 BTC held in backing.
Trading platform Sideswap confirmed that L-BTC cannot yet be redeemed for bitcoin, stating that Blockstream said the peg will be covered 1:1 with peg-outs returning in a later step. Blockstream founder Adam Back posted on X that the 1:1 L-BTC to BTC peg will be covered and cautioned holders against selling L-BTC at a discount over-the-counter.
No official announcement that peg-outs are live has been made since the exploit. The hacker's wallet has received numerous on-chain messages, including encrypted communications and poisoning attacks designed to create fraudulent addresses visually similar to legitimate ones, potentially redirecting future transfers.
Broader Impact on Bitcoin-Backed Projects
The Liquid Network exploit was followed by separate attacks on Symbiosis's bitcoin bridge and Nomic's nBTC token. The three incidents have raised concerns about the security of BTC-backed token projects and layer two platforms. Lightning Network capacity declined from 3,850 BTC at the end of August to 3,720 BTC currently.
The unresolved situation leaves L-BTC holders unable to exit their positions while governance disputes continue between Blockstream and the attackers.
