The Liquid Federation announced on November 3 that Bitcoin reserves supporting the Liquid Network have been fully restored, reestablishing one-to-one backing for every circulating L-BTC.
According to figures published on the network’s public dashboard that morning, 4,270.54 L-BTC were in circulation and matched by an identical quantity of Bitcoin held by the Federation.
The alignment returns the sidechain to the parity that existed before the September 6 incident, when a flaw in the Elements software permitted the creation of roughly 4,000 unbacked L-BTC that were then redeemed for Bitcoin.
SideSwap, a non-custodial exchange and wallet operating on Liquid, confirmed the same reserve and circulation totals and noted that the shortfall had been closed through a series of visible on-chain deposits: 2.5 BTC on October 27, 50 BTC on October 28, and successive transfers of 300 BTC and 250 BTC on November 2.
Of the approximately 3,996 Bitcoin that left the Federation reserve on September 6, 3,400 Bitcoin was returned the following day; the remaining gap of about 602 Bitcoin has now been covered.
The Federation’s statement did not identify the source of the replenishing funds, and SideSwap deferred to that announcement rather than speculate.
Despite restored reserve coverage, direct peg-outs controlled by the Federation remain restricted.
SideSwap’s own conversion service has been available since October 20 for outbound swaps and since September 11 for inbound swaps.
Users can send L-BTC and receive Bitcoin at a one-to-one rate minus SideSwap’s standard 0.1 percent fee, or deposit Bitcoin and receive L-BTC on the same terms.
Because Federation peg-outs have not resumed, every customer payout is drawn from SideSwap’s own Bitcoin wallet.
The firm then exchanges the L-BTC it receives for Bitcoin in bulk under arrangements described by the Liquid Network.
That wallet is replenished manually; when balances run low, pending peg-outs enter a queue and are settled in arrival order once a refill arrives.
SideSwap has stated that queued orders are not lost, that no further action is required from users, and that it cannot guarantee completion times.
The Federation’s October recovery outline indicated that full one-to-one backing would precede any controlled reactivation of peg-outs for authorized holders of peg-out authorization keys, subject to remaining security and operational requirements.
An independent security audit was described in late October as nearing completion.
SideSwap has said it does not know the timing of the Federation’s next steps and that its service will continue in its present form until those peg-outs return, at which point bulk exchanges will be replaced by the network’s own withdrawal process.
Public reserve data remain available on liquid.network, and operators of Liquid nodes can independently verify the Federation’s proof of reserves.
Other assets issued on Liquid, including stablecoins, continue under separate issuer arrangements and were unaffected.
Network fees continue to be paid in L-BTC, and SideSwap’s open order books have operated since early September with prices determined by market participants rather than by any fixed rate set by the provider.
Users seeking to exit L-BTC can therefore do so through SideSwap at the stated rate and fee, yet may still encounter temporary delays while the provider’s wallet is refilled by hand.
Full restoration of the Federation’s native withdrawal route depends on the completion of outstanding security and operational work. Additional details on governance changes and further safeguards are expected from the Federation in the coming weeks.
