Liquid Network restarts after $320M hack, but peg-outs remain frozen — What’s happening?

After a major hack drained roughly $320 million from its federation wallet, Liquid Network is gradually seeing a comeback.

Though full operations have not been resumed yet, block production has been resumed, with functionary nodes successfully signing and validating blocks. On 10th September, Liquid restarted block production. However, it initially kept transactions disabled.

By later in the evening, the network had progressed further and transactions had resumed. This suggested that users could once again transact with assets already on Liquid. However, in this process, transactions were initially kept paused during the monitoring stage to ensure stability. 

A look at the remaining steps

A few key measures are yet to be taken care of. These include the peg-outs which have been disabled. For context, a peg-out is the process of moving LBTC from Liquid back to the Bitcoin [BTC] network while receiving BTC in return.

This means that while users can now make transactions within Liquid, they cannot withdraw their LBTC back to the Bitcoin main chain through the normal peg-out process.

This has been done intentionally to ensure safety and avoid another attack. Blockstream is likely to keep this function disabled until it is confident of the Liquid network’s internal state. Also, it will make sure that the BTC/LBTC reserves have been correctly restored and verified.