The reserve gap after the liquid test transfer narrowed to 600 BTC

After a test transfer was completed, the reserve gap of the Liquid Network has narrowed to about 600 BTC. Samson Mow, a member of the Liquid Federation, stated that the remaining funds are expected to be in place within the next few days, but the recovery plan still requires full reserve backing before direct redemptions can be restarted.

Previously, the Liquid Network experienced a security incident where attackers exploited a rangeproof verification cache vulnerability in Elements to issue approximately 4,000 L-BTC without providing sufficient Bitcoin backing, and transferred out about 4,000 BTC through the redemption channel of Federation member SideSwap. After the incident, the attackers have returned 3,400 BTC, with approximately 602 BTC still being recovered.

Blockstream suspended the Liquid bridge nodes after the incident and notified exchanges to pause L-BTC deposits and withdrawals, subsequently deploying an emergency patch and releasing Elements v23.3.4 to fix the related vulnerabilities. Currently, trading on the Liquid Network has resumed, but direct redemptions remain suspended, with a reserve coverage ratio of about 85.8%.