The Liquid Network has resumed block production after a hacker drained nearly 4,000 BTC from its federation wallet and later returned most of it. Peg operations stay suspended while Blockstream works to restore the BTC/L-BTC reserve, and CEO Adam Back has pledged to cover the L-BTC peg in full.
Liquid Restarts Blocks, Keeps Transactions Frozen
The Liquid Network, a Bitcoin sidechain Blockstream launched in 2018, began producing blocks again after an exploit drained roughly 4,000 BTC from the network's federation wallet on Sunday. The Liquid team said on social media that the network had "entered the next phase of its controlled resumption," confirming that blocks are now processing while it monitors stability.
Transactions remain unavailable, however. Liquid said peg operations, including PAK-authorized peg-outs, stay suspended while it works through the final recovery stage of restoring the BTC/L-BTC reserve.
Hacker Returns Most of the Funds, Keeps the Rest
Blockstream has stayed in contact with the attacker through onchain messages since the exploit halted operations and froze user assets, including stablecoins, on the network. The hacker has since returned 3,400 BTC while keeping close to 600 BTC, and Blockstream says it is still pursuing recovery of the remainder.
On September 9, the anonymous hacker criticized Blockstream's security budget, disclosing that the company allocated only $1.5 million to secure $5 billion in assets. The hacker said failing to pay a 10% bug bounty would result in the loss of the unreturned assets.
Back Pledges Full Coverage of the L-BTC Peg
Blockstream founder and CEO Adam Back addressed the coverage of L-BTC, the token representing BTC on the Liquid sidechain. He clarified that the L-BTC peg with BTC will be covered, letting users withdraw their L-BTC and receive the same amount on the Bitcoin network. Back did not explain how the roughly 600 BTC shortfall will be covered once peg-out operations resume.
Back also urged holders not to panic, telling users the team is working on system updates to resume peg-in and peg-out operations without specifying a timeframe.
Source: Bitcoin News
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