The Liquid Federation says LBTC has returned to full 1:1 backing with Bitcoin, two months after most of the sidechain’s reserves were drained in an exploit carried out by self-described white-hat hackers.

According to the federation, BTC-to-LBTC swaps at a 1:1 rate have resumed through participating providers in recent weeks. Blockstream CEO Adam Back also shared a dashboard indicating assets and liabilities are again matched at 100%, while the federation did not explain how the remaining reserve gap was closed.

Backing restored after reserve shortfall

LBTC is the tokenized form of Bitcoin used on the Liquid Network. The federation said all outstanding LBTC is once again backed one-for-one by Bitcoin held in reserve, restoring the peg after a period in which reserves were left below liabilities.

Back said the reserve position can be checked by users running their own Liquid nodes, pointing to a dashboard that showed full asset coverage. The announcement marks the network’s clearest confirmation so far that the reserve imbalance has been resolved.

What happened in the exploit

The disruption dates back to September, when purported white-hat hackers withdrew about 4,000 BTC from Liquid’s reserves. At the time, that amount was valued at roughly $320 million.

The attackers later returned 3,400 BTC, but kept about 598 BTC. That left Liquid with a significant shortfall against the Bitcoin that was meant to back LBTC in circulation.

No details yet on how the gap was covered

While the federation now says full backing has been restored, it did not specify how the remaining deficit tied to the hack was addressed. That leaves open whether the missing amount was replaced through internal funding, outside support, or another mechanism.

Blockstream had previously said it would not pay a ransom for the unrecovered Bitcoin. The latest update confirms the operational outcome for LBTC holders, but not the precise financial path used to get reserves back to parity.

Liquid’s role and what comes next

Launched by Blockstream in 2018, Liquid is a Bitcoin sidechain where users lock BTC into a wallet controlled by the federation and receive the same amount of LBTC for use on the network.

Alongside the reserve update, the federation said it is modernizing Liquid’s governance and adding more safeguards. It has not yet provided those details, saying further information will come later. For now, the key confirmed change is the return of 1:1 BTC-LBTC swaps and full stated Bitcoin backing for LBTC.

Source: decrypt.co