Liquid Network Nears Full Recovery After $320 Million Hack

Liquid Network recovery — The Liquid Network, a Bitcoin sidechain created by Blockstream, has announced it is entering the final stages of recovery more than a month after a hack drained 4,000 BTC from its federation wallet.

In a blog post on Tuesday, the network stated it is working to reestablish its full 1:1 bitcoin backing, with the technical infrastructure and safeguards now in place. The final phase will involve the controlled reactivation of peg-outs for authorized key holders.

Blockstream CEO Adam Back confirmed on X that full swap functionality for converting Liquid Bitcoin (LBTC) to and from mainchain BTC and the Lightning Network has been restored. The hack, which occurred in September, exploited an inflation bug to create fraudulent LBTC tokens that were cashed out for real bitcoin.

While the perpetrators returned most of the funds in what they called a “white hat” operation, they retained approximately 600 BTC, or 15% of the total, worth nearly $50 million. The hackers had demanded a 10% bounty from Blockstream and criticized the company in messages embedded in Bitcoin blocks. It remains unclear if a private settlement was reached.