The Liquid Network’s bitcoin reserve has returned to full one-to-one backing for circulating L-
BTC market price and chart, marking a major recovery step after a September exploit exposed a gap between tokens in circulation and bitcoin held by its Federation.
SideSwap, a non-custodial service operating on Liquid, said in a November 3 statement that 4,270.54 L-BTC was circulating against an equal 4,270.54 BTC in the Federation reserve that morning. Its disclosure cites the public figures shown on the Liquid Network’s website.
The restored backing does not mean every withdrawal mechanism has returned to normal. The Federation’s own peg-out service remains restricted, and SideSwap is processing bitcoin redemptions from its own wallet under an interim arrangement.
How Liquid Rebuilt Bitcoin Reserve Backing
The disruption began on September 6, when, according to SideSwap, a flaw in the Elements software allowed an attacker to create approximately 4,000 L-BTC without corresponding bitcoin backing and remove bitcoin through a peg-out service.
About 3,996 BTC left the Federation during the incident. SideSwap said 3,400 BTC was returned on September 7, while a subsequent Blockstream assessment put the outstanding amount at roughly 602 BTC.
Blockchain transactions cited in the latest statement show reserves being replenished in stages. These included 2.5 BTC on October 27, 50 BTC on October 28 and transfers of 300 BTC and 250 BTC on November 2.
SideSwap said those additions brought the reserve to parity with L-BTC circulation. The service did not identify the ultimate source of the replenishment and referred readers to the Federation for details.
Peg-Outs Remain Limited Despite Full Backing
Liquid’s L-BTC is designed to represent bitcoin used within the network. Full reserve backing and functioning redemption channels are related but distinct: a fully backed asset may still face operational limitations when converting back to bitcoin.
SideSwap said its peg-in service has been open since September 11, while its peg-out facility resumed on October 20. Both currently operate at a one-to-one exchange ratio less a standard 0.1% service fee.
However, SideSwap’s peg-outs are paid using its own bitcoin wallet, which must be refilled manually. Users may encounter queues if that wallet temporarily runs short. The service said pending redemptions are processed in arrival order as funds are replenished.
Federation-operated peg-outs will return only after remaining security and operational requirements are met. No confirmed restoration date was given.
What the Recovery Means for Liquid Users
SideSwap said user wallets, keys and account balances were not affected by the September incident. It also stated that separately issued Liquid assets, including USDt and DePix, were not directly affected by the L-BTC backing shortfall.
The distinction matters to users assessing network exposure. Restored backing addresses the reserve deficit, but liquidity, redemption queues and security controls remain practical considerations.
The statement points to publicly available reserve and circulation data at liquid.network, allowing observers to compare backing figures. It also says Liquid node operators can verify reserve proofs independently.
Security Review and Governance Still Outstanding
The Liquid Federation has indicated that further governance and safety measures will be detailed after remaining reviews. SideSwap said an independent security audit was nearing completion as of an October 27 update.
The episode highlights risks involving blockchain bridges and pegged assets, even when their intended design is simple. BlockBriefing’s guide to crypto bridges explains how moving value between networks introduces additional infrastructure and security assumptions.
For now, the significant verified development is restored one-to-one bitcoin backing. A full return to normal Liquid redemption functionality remains a separate milestone to monitor.
