Liquid is a Bitcoin sidechain whose L-$BTC token is intended to be backed one-for-one by bitcoin. The gap follows a Sept. 6 exploit that, according to Blockstream’s incident assessment, created about 4,000 unbacked L-$BTC that was converted into bitcoin through peg-outs. Blockstream said 3,400 $BTC was returned on Sept. 7.
Swaps Are Open, Normal Peg-Outs Still Restricted
Mow also said “the federation has already been conducting semi-automated peg-outs for the last week to members.” The federation’s own Oct. 20 announcement described restored user swap functionality through “semi-automated swaps for Federation members.”
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For end users, participating providers offer a route back to bitcoin while normal direct withdrawals from federation reserves remain restricted. In an Oct. 27 update, the federation confirmed $BTC and L-$BTC swaps were available through AQUA, Bull Bitcoin and SideSwap.
The distinction affects how users receive bitcoin. SideSwap’s Oct. 21 notice says payouts come from its own Bitcoin wallet at a one-for-one rate less a 0.1% fee. That wallet is replenished through partly manual bulk swaps, so requests can queue while refills arrive.
The federation’s published recovery plan calls for restoring full one-for-one backing before controlled reactivation of direct federation peg-outs for authorized Peg-out Authorization Key holders. In its Oct. 27 update, the federation said normal peg-outs remained subject to enhanced operational controls while security hardening continued and an independent security audit neared completion.
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