LBTC Redemption on Liquid Network Faces Extended Suspension
The function to redeem LBTC—a Bitcoin-pegged asset on the Liquid sidechain—for native Bitcoin has been inactive for more than 35 days. This prolonged halt stems from a major security incident where an attacker exploited a vulnerability in the Elements client software to steal nearly 4000 BTC.
Aftermath of the Exploit: Partial Return and Standoff
The situation took an unexpected turn post-incident. The attacker voluntarily returned approximately 3400 BTC, but a balance of 598.5 BTC (worth around $49.69 million at current prices) remains in their control. The conflict now centers on a "bounty" demand.
The individual has requested 10% of the stolen funds' value as a reward for the partial return. This demand has been firmly rejected by Blockstream, the primary developer behind Liquid Network, which insists on the full and unconditional restitution of the remaining bitcoin.
Network Security Overhaul and User Challenges
To address the root cause and rebuild confidence, Liquid Network is implementing several key security enhancements:
- Commissioning an external security audit for the patched Elements client version v23.3.4.
- Updating the Peg-in Authorization Key (PAK) list by the Liquid Federation to strengthen asset control.
- Moving all redemption keys to cold storage, significantly improving offline security.
For everyday LBTC holders, however, uncertainty persists. No official timeline has been provided for resuming the redemption service. Many users have turned to third-party services like Sideswap or Sideshift.ai to move or exchange their assets.
This workaround comes at a cost. Due to limited liquidity, some users report that the migration process can take weeks. When combining platform price spreads with transaction fees, the total cost to users can reach approximately 5% of their asset's value, adding considerable financial and operational complexity.