Liquid is processing transactions again, but LBTC holders still cannot redeem through the federation’s Bitcoin withdrawal channel. A reserve shortfall remains, with no confirmed restart date.
Liquid Network’s channel for converting LBTC back into Bitcoin on the main chain remained closed on October 11, 2026, 35 days after the September 6 attack. A notice on Liquid’s official website still said peg-out operations were paused. The suspension does not cover every Liquid operation: the network is producing blocks again and LBTC can move between wallets.
Reserves cover 85.77% of circulating LBTC
At 16:12 UTC, the Liquid block explorer showed 4,234.76 LBTC in circulation against 3,632.23 BTC held by the federation. The difference was 602.53 BTC, with the explorer calculating backing at 85.772%. The snapshot uses Liquid block 4,096,099 and Bitcoin block 970,953.
LBTC represents Bitcoin on the Liquid sidechain. Under normal operation, BTC locked on the main chain is matched by LBTC issued on Liquid; redemption burns LBTC and releases the corresponding BTC. A reserve shortfall means the full one-for-one backing is missing. The number of LBTC in a wallet and its market price are separate measurements.
85.77% backing does not mean every wallet has received a haircut. The reserve ratio divides total BTC reserves by circulating LBTC. It is neither a decision to reduce users’ balances nor a quoted market price. With the federation’s redemption channel closed, it is not a currently available repayment rate either.
The deficit left by the September attack
Blockstream’s assessment, published on September 23 and republished by Liquid on September 25, says an Elements validation-cache flaw allowed roughly 4,000 unbacked LBTC to be created. The attacker used the withdrawal channel to access reserve BTC and returned 3,400 BTC on September 7. The incident was not described as a breach of Bitcoin’s main chain. The Elements 23.3.4 patch was released on September 9, but the software fix did not reopen the withdrawal channel that day.
An address linked to the attack by Bitcoin.com’s October 11 report held roughly 598.5 BTC when checked on Mempool during reporting. A single address balance is not the same calculation as the network’s total reserve deficit. The 602.53 BTC shortfall comes directly from comparing outstanding LBTC with federation holdings.
Transfers work; Bitcoin redemption remains unavailable
SideSwap’s September 11 update recorded that Liquid transactions had resumed on September 10 and that Bitcoin-to-LBTC peg-ins reopened the following day. Sending LBTC to another wallet, or trading it on a market, differs from redeeming it for reserve BTC through the federation.
SideSwap also relayed Adam Back’s commitment to restore one-for-one backing. Its statement did not explain how or when that would happen. Reserves were still short on October 11.
An audit update, but no reopening date
Liquid’s official X post of September 29 described the status as of September 28 at 05:48 UTC. It said an “independent external security audit” of Elements 23.3.4 was under way, alongside changes to the peg-out authorization list and secure cold storage for keys. The post was not an audit completion notice and did not give a date for restoring withdrawals.
Liquid’s September 29 post, reporting the status as of September 28
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