The nearly 4,000 BTC withdrawal that froze the Liquid Network has taken a dramatic turn, with most of the Bitcoin now back.
Following an extended on-chain dialogue with Blockstream, the white hat hackers returned 3,400 BTC in block 965,950 to the original Federation address.
The returned Bitcoin [BTC] was worth roughly $268.16 million. Precisely, the transfer restored approximately 85% of the withdrawn Bitcoin under Federation control.
Blockstream, Liquid’s technical provider, reassured the hackers that the nodes have been patched as requested by the hackers during the dialogue.
Meanwhile, approximately 598.5 BTC was deposited in a newly created wallet. Simply, that 15% of the total money removed from Liquid’s system has been kept by the attackers as an unofficial bounty.
The return of these Bitcoins will help greatly in reducing the economic impact of this incident. However, this does not correct the authorization issue, which allowed for the withdrawal.
Thus, before starting operations again on its bridge, Liquid needs to address this authorization issue.
Liquid shifts focus to restoring operations
Once funding was restored, Liquid’s primary issue now is to get the network up again. Yet, this time avoid repeating the same failures.
In preparation for a synchronized restart after an extended shutdown of the network, Blockstream has rolled out new versions of the software that will be used by all Federation members once they are ready.
Bridge nodes remain disabled, keeping minting and burning unavailable while members strengthen the network before restoring access. This cautious approach limits fresh exposure while security changes undergo coordination across the Federation.
Even though the bridge node remains shut down until the other nodes on the network have been stabilized. Hence, minting and burning have been suspended until then.
Limiting exposure to potential future breaches helped take the network offline. However, staying offline for so long creates further issues by restricting normal bridge functions.
Ultimately, when members of the Federation safely reactivate their portion of the network, Liquid can successfully restore its bridges.
Can Liquid make its comeback stick?
Meanwhile, once Liquid is activated, the actual proof of a successful recovery will be in what users can do once again.
The average number of activities hovered around 190 transactions per hour before the incident. This provides a clear picture of how much activity should be produced by the side chain after it is functioning properly.
Still, peg-outs will also need to function so Bitcoin can transfer into and out of the federation. Exchange support, then, becomes equally important, since restored LBTC deposits and withdrawals would reconnect users with external liquidity.
All together, they will have to increase at the same time rather than independently proving full restoration of services.
