Liquid Network restored semi-automated swaps between bitcoin and L-BTC on Oct. 20, while direct federation redemptions stay suspended. Reserves cover about 85.8% of outstanding L-BTC, and the recovery plan sets no firm date for reopening peg-outs.
Liquid Network said on Oct. 20 that it had restored semi-automated swaps between bitcoin and L-BTC. Holders get a route to bitcoin through supported providers, while direct federation redemptions remain suspended.
The federation's staged recovery update says the swaps are being enabled in coordination with participating providers, without protocol-imposed volume limits. However, the swaps do not reopen direct withdrawals from the federation's reserves, known as peg-outs.
Reserve gap persists
Liquid is a Bitcoin sidechain whose L-BTC token is designed to be backed one-for-one by bitcoin. Mempool's Liquid explorer showed 3,632.23 BTC in federation holdings against 4,234.76 L-BTC in circulation at about 8:52 a.m. ET on Oct. 20. That equals about 85.8% reserve coverage and a 602.53 BTC deficit, the same shortfall The Defiant reported on Oct. 11.
According to Liquid: "Normal peg and balance validation will be reinstated soon," the network said in an Oct. 20 post.
Full backing comes before peg-outs
The federation said enough operators had installed updated software for managing its bitcoin reserves to move to the next recovery phase. Safeguards remain in place to prevent premature or unauthorized peg-outs.
The recovery plan calls for full one-for-one backing to return before federation peg-outs reactivate for authorized Peg-out Authorization Key holders. Blockstream's incident assessment says the Sept. 6 exploit of Elements, the software underlying Liquid, created approximately 4,000 unbacked L-BTC that was converted into bitcoin through the peg-out process. Blockstream said 3,400 BTC was returned on Sept. 7.
Blockstream CEO Adam Back said on Sept. 10 that the one-for-one peg would be covered. The new plan does not specify how the remaining reserve gap will be funded or give a firm date for reopening federation peg-outs.
Source: The Defiant
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