The Liquid Federation says every LBTC token is again backed one-to-one by bitcoin, two months after a roughly $320 million drain. Outlets disagree on who funded the repair, and the federation has not explained how the gap was closed.
Liquid says LBTC is fully backed again
On Monday the Liquid Federation announced that the reserves of bitcoin held by the network are whole again. According to Decrypt, the federation said every LBTC, which is the sidechain's bitcoin-denominated token, is once more backed one-to-one.
Blockstream CEO Adam Back shared a screenshot of the network dashboard in which assets equal liabilities, at 100%, and the reserve shortfall reads 0.00 BTC. The federation also said users who run their own Liquid nodes can check the reserves directly. Decrypt reported that BTC and LBTC swaps at a 1:1 rate had already returned through participating providers several weeks earlier.
How the September drain unfolded
Liquid was launched by Blockstream in 2018 as a bitcoin sidechain, a separate blockchain built for faster and more private transfers. Users deposit BTC into a wallet that the federation controls. The federation is made up of exchanges and other crypto firms that run the network. They receive the same amount of LBTC in return.
Decrypt reported that on September 6, self-described white-hat hackers took roughly 4,000 BTC out of the federation wallet. The coins were then worth around $320 million. They contacted Blockstream using messages signed with PGP and placed inside Bitcoin transactions.
On the following day they returned 3,400 BTC, once Blockstream stated that it had fixed the bridge nodes. They kept roughly 598 BTC. Decrypt reported that Blockstream subsequently declined to pay for the return of the remaining bitcoin, calling the withholding of the coins theft rather than responsible disclosure.
The figures that define the recovery
- Decrypt reported that roughly 4,000 BTC, valued near $320 million at the time, left the federation wallet on September 6.
- 3,400 BTC, worth about $269 million, came back the following day, with roughly 598 BTC retained by the attackers.
- The dashboard shown by Back put the reserve deficit at 0.00 BTC.
Who paid for the shortfall? The outlets differ
The accounts diverge on funding. The Block reported that Blockstream provided the funds that restored full backing. CoinDesk wrote that the federation behind the network still has not said who paid to fill the hole.
Decrypt also reported that the federation gave no explanation of how the gap from the hack was filled. Decrypt and CoinDesk therefore leave the question open, while The Block's summary names Blockstream. The summaries available for The Block and CoinDesk are short, so details such as the structure of the payment cannot be established from them.
The Defiant, which framed the event as an Elements exploit, added a different angle. It reported that having full reserves meets one requirement for resuming withdrawals made directly through the federation, which had most recently been reported as operating under tighter operational controls. The Defiant did not say in its summary when those withdrawals would resume.
What Blockstream says has been hardened
Asked on X what would prevent a repeat, Back listed three lines of defense. Peg-out authorization keys have been refreshed and are now held in cold hardware wallets. Proof validation caches have been disabled, alongside a bug fix for nodes. He said the consensus rules were also hardened so that the network fails safe, and that outside auditors have reviewed it several times.
Back also cautioned developers about AI-suggested fixes, writing that they should be treated with suspicion. In an October 20 interview with Bloomberg Television, he described a wave of AI-assisted security analysis and said AI can be used to find defects. He said at the time that the investigation into the stolen funds was continuing.
The federation said it is overhauling how Liquid is governed, with more clearly defined roles and oversight, along with extra technical and operational protections. It promised further details in the coming weeks.
Why full backing matters to LBTC holders
A sidechain token like LBTC is only as good as the reserves behind it. When reserves fall below the amount of tokens outstanding, each token becomes a claim on a pool that cannot cover everyone, and the 1:1 redemption promise weakens. Restoring the full reserve removes that gap on paper, and the public dashboard lets observers track it.
Ledger CTO Charles Guillemet had remarked that, if the coins the attackers kept were a negotiated payment, the deal resembled extortion more than white-hat work.
Open questions to watch
The central unknown is who bore the cost of the repair and under what terms. Federation members and LBTC holders may want that answered, since it affects how much trust the arrangement deserves.
Other items to follow include the promised governance changes, the timing of direct federation withdrawals, and the status of the roughly 598 BTC the attackers kept. On October 20, Back said the hacked funds remained under investigation.
Market snapshot
| Asset | Price | 24h | 7d | Market cap |
|---|---|---|---|---|
| Bitcoin (BTC) | $77,293 | -0.7% | -3.3% | $1.55 trillion |
CoinGecko data as of 2026-11-03 (UTC).
FAQ
Is LBTC fully backed by bitcoin again?
The Liquid Federation says so. Decrypt reported that the dashboard shows assets equal to liabilities, at 100%, and no reserve shortfall. The federation added that people who run their own nodes can check the reserves themselves.
Who paid to restore Liquid's reserves?
The Block reported that Blockstream provided the funds. CoinDesk wrote that the federation has not said who paid to fill the hole, and Decrypt reported that the federation did not say how the shortfall was covered, so the accounts differ.
How much was taken in the Liquid exploit?
On September 6, self-described white-hat hackers took roughly 4,000 BTC, valued at about $320 million at the time. They returned 3,400 BTC the next day and kept roughly 598 BTC, according to Decrypt.
Sources
- The Block: Liquid Network restores full bitcoin backing following $320 million exploit (2026-11-03)
- Decrypt: Liquid Network Restores Full Bitcoin Backing Two Months After $320M Exploit (2026-11-03)
- CoinDesk: Liquid’s bitcoin IOUs are fully backed again after a $320 million exploit (2026-11-03)
- The Defiant: Liquid Restores Full Bitcoin Backing After Elements Exploit (2026-11-03)
- CoinGecko (market data)
Written by the Coinvote news desk from reporting by The Block, Decrypt, CoinDesk and The Defiant. Not financial advice.
