Peg-outs remain suspended while the BTC/LBTC reserve is restored
Blockstream said on September 11 that it will not pay to recover the 598.5 BTC still held following the Liquid Network exploit. The company said it had attempted to recover the funds in good faith but rejected the requested terms.
According to Blockstream, taking and retaining the assets constitutes theft rather than responsible disclosure. The company said that, without their return, it will work with law enforcement, exchanges, service providers and forensic specialists to trace the funds and identify those responsible.
Liquid’s September 8 incident report attributed the exploit to a vulnerability in the cache for Elements range-proof verification, the software underlying the network. About 4,000 LBTC may have been created without backing in bitcoin held in reserve. Liquid said its operators were not breached and that no keys were compromised.
The exploit’s author returned about 3,400 BTC on September 7, while about 598.5 BTC remain unreturned. Liquid released Elements v23.3.4 on September 9, resumed block production on September 10 and re-enabled transactions the same day. Peg-outs remain disabled during the final phase of restoring the BTC/LBTC reserve.
