The Liquid network sidechain, launched by Blockstream in 2018, has entered a controlled resumption phase following a major exploit that involved nearly 4,000 BTC. While block production has resumed, transactions remain unavailable as the team monitors network stability.
Network Status and Recovery Phase
Following the security incident on Sunday, operations were halted after a white-hat hacker withdrew 4,000 BTC from the federation wallet. This temporary freeze left users holding assets such as stablecoins unable to move or control them. Peg operations, including PAK-authorized peg-outs, remain suspended while the restoration of the BTC and L-BTC reserve continues.
Blockstream has maintained communication with the hacker via onchain messages. The hacker has returned 3,400 BTC while retaining approximately 600 BTC, demanding a 10 percent bounty and threatening to keep the remaining funds if the demand is not met. The hacker also criticized Blockstream's security budget, pointing to a $1.5 million allocation for securing $5 billion in assets.
Blockstream Response and User Reassurance
Blockstream CEO Adam Back addressed the community regarding L-BTC coverage, confirming that the L-BTC peg with bitcoin will be covered. This will allow users to withdraw their L-BTC and receive the equivalent amount on the Bitcoin network. Back advised users against panic selling over-the-counter while the team works on system updates to eventually resume peg-in and peg-out operations.
The Liquid team stated that transactions will stay disabled until system stability is fully confirmed, and efforts to recover the remaining funds are ongoing.
