The Liquid Network, a Bitcoin sidechain, was paused this week after a hack that drained roughly $320 million. Blockstream, the company behind it, has told the hacker it's safe to return the funds. The incident has also exposed a deeper problem: L-BTC, the network's native token, is now backed by just 4.7% of the bitcoin it's supposed to hold.
The pause and the hack
Liquid Network went dark after the attack, which took about $320 million. The pause was a defensive move, meant to stop further losses while the team assessed the damage. It's not clear how long the network will stay offline, or what exactly was targeted.
Blockstream's message to the hacker
Blockstream made an unusual public appeal, saying it is 'safe to return the funds' to the hacker. That's a direct request, not a threat. It suggests the company is trying to negotiate a return rather than chase the money through legal channels. Whether the hacker listens is another question.
A 4.7% backing problem
The hack has left L-BTC in a precarious spot. The token is supposed to be backed 1:1 by bitcoin held in the network's reserves. Right now, that backing stands at just 4.7% of what's required. That means anyone holding L-BTC is holding something that's mostly unbacked. It's a serious hole, and it's not going to be easy to fill.
Silence from key players
Most of the major participants in the Liquid Network haven't said a word about the hack. No statements, no updates, no reassurances. That silence is loud. Users are left guessing about the network's future, and about whether their L-BTC will ever be worth what it was supposed to be.
The next step is likely to be a decision on whether to restore the peg or reissue L-BTC. The coming days will show whether the hacker returns the funds and how the network plans to recover.
