Liquid’s LBTC once again fully backed by real bitcoin after $320M exploit Liquid Network users can breathe easier: every LBTC token is now redeemable 1:1 for bitcoin after the federation restored the missing reserves nearly two months after a software bug allowed an attacker to mint and cash out unbacked LBTC. Liquid is a Bitcoin sidechain operated by a federation of firms led by Blockstream and used by exchanges and traders who want faster, off-chain bitcoin movements. The system works by users locking BTC with the federation and receiving LBTC in return — tokens that are supposed to be directly redeemable for the same amount of bitcoin at any time. That guarantee broke on Sept. 6, when a bug in Liquid’s code let an attacker mint roughly 4,000 LBTC without depositing BTC, then redeem those tokens for on-chain bitcoin. Blockstream’s incident report showed the federation’s reserve plunged from about 4,205 BTC to just 197 BTC. The attacker — who claimed to be a white hat — returned roughly 3,400 BTC the following day, but about 600 BTC remained missing. On Monday the Liquid Federation announced on X that the final 250 BTC transfer had closed that gap, restoring full 1:1 backing for all LBTC. The group pointed users to the network’s public dashboard, where the reserve balance can be independently verified. The restoration is a relief for Liquid users and counterparties, but the episode highlights the risks of federated sidechains: software vulnerabilities and centralized custody points can expose users to large, rapid losses. The federation’s public updates and the visible dashboard aim to rebuild transparency and confidence after the $320 million incident. Read more AI-generated news on: https://app.chaingpt.org/news