Liquid Network Restarts Block Production After Major BTC Exploit

The Liquid sidechain, launched by Blockstream in 2018, announced that block production has resumed following a security incident that allowed a white‑hat hacker to withdraw nearly 4,000 BTC from the federation wallet.

Controlled Resumption Phase

Liquid’s team stated that the network has entered the next phase of a controlled resumption. Block production is active, but transaction processing remains disabled while the system’s stability is monitored.

Peg Operations Remain Suspended

All peg‑related activities, including PAK‑authorized peg‑outs, stay suspended. The team is working on restoring the BTC/L‑BTC reserve before peg‑in/out functions can be re‑enabled.

Hacker Interaction and Fund Recovery

• The hacker returned approximately 3,400 BTC and retained about 600 BTC.
• Blockstream has communicated with the hacker via on‑chain messages and is pursuing the recovery of the remaining funds.
• The hacker demanded a 10 % bounty and criticized Blockstream’s security budget.

Blockstream’s Commitment

Blockstream pledged to cover L‑BTC on a 1:1 basis with BTC, reassuring users that their L‑BTC holdings will retain value on the Bitcoin network. The company is also developing system updates to eventually resume peg‑in and peg‑out operations.

Outlook

While block production is back, the network will not process transactions until stability is confirmed and the reserve is fully restored. No specific timeline for full resumption was provided.