Liquid recovers 3,400 bitcoin after Blockstream patches vulnerability

JAKARTA – Liquid Network, a bitcoin sidechain developed by Blockstream, recovered 3,400 bitcoin after the company announced the network's bridge nodes were patched following the outflow of nearly 4,000 bitcoin from the Liquid Federation wallet on September 6, 2026.

The Liquid Federation wallet, which initially held over 4,200 bitcoin, dropped to around 197 bitcoin due to the incident, resulting in outstanding L-BTC tokens being supported by only about 4.7% of the required reserves.

Quoted from The Block, the return of 3,400 bitcoin is equivalent to about 85% of the total that previously left the federation. 

Liquid had previously halted network activity and deactivated bridge nodes after the incident, when the value of the outgoing bitcoin reached approximately US$320 million.

The incident began when approximately 4,000 L-BTC were sent to the SideSwap peg-out service, which then burned the tokens using legitimate peg-out authorization, causing the Liquid Federation to release about 3,996 bitcoin to a user's address. 

Blockstream then identified that the L-BTC used in that transaction was created through a vulnerability in Elements, the open-source software underlying the Liquid Network.

SideSwap stated that its Peg-out Authorization Key and internal systems were not compromised in the incident.