Liquid Network resumes block production after $320 million Bitcoin withdrawal

Liquid Network has restarted block production after the incident that saw about 4,000 Bitcoin, worth roughly $320 million, withdrawn from its federation wallet. The catch for anyone watching the plumbing: transactions and peg operations are still suspended, so the network is moving again, but not yet in full working order.

1. In a Thursday post on X, Liquid said block production had resumed “without transactions” as a precaution while the network is monitored to “confirm full stabilization.” Required updates to its functionary and bridge nodes have been deployed, and functionary nodes are now signing and validating blocks as intended.
2. Peg operations, including PAK-authorized peg-outs, remain suspended while Liquid works to restore its BTC/L-BTC reserve. For PSPs and other operators, that means the asset flow layer is still constrained even though the chain itself is producing blocks again.
3. Liquid released an emergency update to Elements, the software underlying the network, to address the proof-verification cache vulnerability linked to the incident. The update, Elements v23.3.4, hardened cache keys used for range proofs as part of the recovery plan.
4. The network paused operations on Sept. 6 after actors claiming to be white-hat hackers withdrew about 4,000 BTC from the federation wallet. That represented about 95% of the wallet’s roughly 4,200 BTC balance and involved L-BTC originating from a bug in Elements, the open-source software underpinning Liquid.
5. After Blockstream confirmed that affected bridge nodes had been patched, the actors returned 3,400 BTC, worth about $270 million at the time. About 598 BTC, worth roughly $46 million at current prices, remained outstanding as of Sept. 7.

For high-risk operators, the useful detail is not the headline number alone; it is that Liquid’s block production can resume before peg operations do. In other words, the network can look alive while the settlement path that matters for minting and redeeming L-BTC is still under restriction.