Liquid Network Restores Its Bitcoin Reserves
Key Takeaways
- Liquid Network has fully replenished its bitcoin reserves, restoring 1:1 backing for LBTC.
- The September hack left a nearly 600 BTC shortfall after the attacker returned 3,400 BTC.
- Liquid Network plans governance changes and additional technical safeguards following the incident.
“250 BTC added, closing out the remaining shortfall,” Samson Mow, Blockstream’s former chief security officer, posted on X shortly before the team behind Liquid Network confirmed that its reserves were fully replenished on Nov. 2. This closes the 600 BTC ($46 million) shortfall in almost two months. The team did not specify who contributed the funds or when it would publish the post-mortem of the September hack.
Participating swap providers had already restored BTC and LBTC swaps several weeks ago at a 1:1 rate. The news about the full reserve backing simply removes the main outstanding concern.
According to Liquid Network explorer data, 4,270.54 LBTC ($327 million) are currently in circulation, backed by the same amount of bitcoin.
More News Waiting
As for the next steps, Liquid Network said it was working on modernizing its governance structure, “introducing clearer responsibilities and oversight, and implementing additional technical and operational safeguards to further protect the network and its participants.” The network said it would announce more details on these developments in “the coming weeks.”
On Sept. 6, an attacker exploited a vulnerability in the Liquid Network’s Elements software, stealing almost 4,000 BTC from the protocol. The attacker returned 3,400 BTC the following day but retained almost 600 BTC as a 10% bounty for finding the bug. The attacker has not moved these funds since.
As reported by Bitcoin.com News, LBTC users criticized how the crisis had been handled and looked for more expensive ways to move their funds out of the network, even before the peg was restored. For example, in late September, the Canadian bitcoin exchange and wallet provider Bull Bitcoin said its customers could not convert their LBTC back to BTC using the platform.
Bull Bitcoin founder Francis Pouliot reacted to the news about the restored reserves with “1:1.”
Network Overseen by Top Bitcoin Companies
LBTC is the native token of the Liquid Network. The locked bitcoin backing the token requires 11 of 15 Liquid Network federation signatures to move. However, a now-fixed bug in Elements, the software that Liquid runs on, allowed the attacker to create about 4,000 LBTC without any bitcoin backing them. Then, the exploiter redeemed fake LBTC receipts for real BTC, as the system treated fake receipts as real ones.
Bitcoin giant Blockstream (valued at $3.2 billion in 2021) develops the Elements software, while the Liquid Federation oversees the network. The federation comprises 81 members in total, including Hodl Hodl, Specter, Coinshares, Komainu, Xapo, Bull Bitcoin, Ledger and others.
