What is the Liquid Network?

The Liquid Network is a Bitcoin sidechain developed by Blockstream for faster, more private transfers and for issuing tokens. Bitcoin moved onto Liquid becomes L-BTC, which settles in about two minutes and hides amounts by default. Instead of mining, Liquid relies on a federation of companies to sign blocks and hold the bitcoin that backs L-BTC.

How does the Liquid Network work?

Liquid produces a block every minute, and Blockstream's FAQ says transactions are final after two blocks. Blocks are signed in rotation by 15 functionaries, which are hardware-backed servers run by members of the Liquid Federation. The FAQ describes an 11-of-15 signing threshold. The wider federation has more than 80 member businesses, such as exchanges and infrastructure firms.

Liquid uses Confidential Transactions, which hide the asset type and amount from outside observers, though addresses and fees stay visible. Anyone can also issue assets on Liquid, such as stablecoins or tokenized securities, with the issuer responsible for backing them. All fees are paid in L-BTC.

What is Liquid bitcoin L-BTC?

L-BTC is created through a peg-in. A user sends BTC to a federation address and, after 102 Bitcoin confirmations, can claim the same amount of L-BTC. Going back is a peg-out. Blockstream's FAQ says only federation members can perform peg-outs directly, so most users swap through a member or another service. The Liquid docs add that a set of emergency keys can reach the funds after a long timelock if the network stops working.

This setup means L-BTC holders trust the federation to keep the backing BTC safe, which is a different risk from holding BTC yourself. It is similar in spirit to other wrapped bitcoin designs, though the custody model differs.

What happened in the Liquid incident of September 2026?

According to Blockstream's own incident assessment, on September 6, 2026, an attacker exploited a bug in the Elements software that Liquid runs on. The bug let a transaction pass validation even though its output was not backed by its inputs, creating about 4,000 unbacked L-BTC. That L-BTC was pegged out through the SideSwap service, releasing about 3,996 BTC on Bitcoin. Blockstream said no federation keys were stolen, but also found that SideSwap had kept its peg-out key online, against the federation's charter.

Gizmodo reported that the attackers called themselves white hats. Blockstream says they returned 3,400 BTC on September 7, leaving about 602 BTC outstanding. The network paused, then resumed user transactions on September 10 after a software fix.

Is the Liquid Network fully running as of November 2026?

Not entirely, based on the latest reports we could verify. Crypto.news reported on September 29 that peg-outs were still suspended while an external audit was under way. TokenPost reported on October 20 that Liquid had upgraded federation nodes and was reopening BTC and L-BTC swaps in phases, while direct peg-outs stayed restricted until reserves were rebuilt to one to one. Check Liquid's official channels for the current status before moving funds.