The Liquid Network says it has entered the final stage of restoring operations after hackers took 4,000 bitcoin from its federation wallet in September, an incident that was valued at about $320 million at the time. Most of the funds were later returned in a recovery effort described as a “white hat” operation.
According to Bitcoin Magazine, the network said on Tuesday that it was operating again with enhanced security measures, while work continues to restore its full bitcoin backing and resume all authorized withdrawals.
Restoration moves toward full backing
Liquid is a Blockstream-created layer-2 network, or sidechain, designed to enable faster movement of assets backed on a one-to-one basis by bitcoin. Its ecosystem also supports swaps involving stablecoins, bitcoin and bitcoin held on the Lightning Network through compatible applications.
The September attack targeted the federation wallet that supports the network. The attackers exploited an inflation bug on the Liquid sidechain to generate more than 4,000 LBTC, a token intended to represent bitcoin but which had not previously existed. They then exchanged the newly created LBTC for actual bitcoin on the underlying blockchain.
Liquid said the remaining restoration work would first involve reestablishing complete 1:1 bitcoin backing. After that, it plans a controlled restart of federation peg-outs for authorized PAK key holders. Peg-outs are the process of converting assets on the sidechain back into bitcoin on the main Bitcoin network.
The network said the Federation, Blockstream and independent security specialists had made substantial progress, with the technical systems and safeguards required for the next phase now in place.
Swaps resume as funds remain disputed
Liquid has also reintroduced phased swaps. Blockstream Chief Executive Adam Back said on X on Tuesday that swaps were functioning again, although the network’s statement described the broader recovery as still being in its final stages rather than complete.
The hackers presented themselves as white hat operators and communicated with Blockstream through messages embedded in Bitcoin blocks. They demanded a bounty equal to 10% of the stolen bitcoin, arguing that Blockstream should pay it from its own funds. In one message, they threatened to disclose encrypted communications from the exchange if their demand was not met.
Critics disputed the white hat label because the attackers retained 15% of the stolen funds. The latest public information cited in the report put that amount at about 600 bitcoin, worth close to $50 million at current prices. It remains unclear whether Blockstream reached a private settlement with the hackers.
Market picture
Moneyiar market data at 11:19 a.m. on October 21, 2026, showed Bitcoin at $83,310.732823986, up 2.33% over 24 hours but down 0.07% over seven days.
Other assets in the supplied data were mixed over the week: Monad was $0.0224020585, up 8.15% in 24 hours and down 8.82% over seven days; Tagger was $0.000498726, up 8.31% daily and down 15.37% weekly; and Aethir was $0.0060473958, up 11.32% daily and down 1.61% weekly.
