Liquid restores full L-BTC backing, but Federation peg-outs remain restricted

Reserves once again match the outstanding supply

SideSwap, a Liquid Federation member and conversion provider, said on November 3, 2026 that L-BTC backing had returned to a one-for-one ratio. On the morning of publication, the service reported 4,270.54 L-BTC in circulation against 4,270.54 BTC held in the Federation reserve. Those figures restore the expected accounting equality between bitcoin locked on the main chain and the token used on the Liquid sidechain.

The restoration closes one part of the September 6 incident. According to Blockstream’s technical assessment, a flaw in the Elements rangeproof verification cache had allowed about 4,000 unbacked L-BTC to be created. About 3,996 BTC left the reserve before the network was halted. The responsible party then returned 3,400 BTC on September 7, leaving about 602 BTC to be replaced according to the report published later that month.

Four visible deposits closed the gap

SideSwap describes a gradual replenishment: 2.5 BTC entered the Federation wallet on October 27, followed by 50 BTC on October 28. Two additional deposits of 300 BTC and 250 BTC were recorded on November 2. Together they brought the reserve back in line with the outstanding supply. The transactions are visible on Bitcoin, while a Liquid node can directly verify the network’s proof of reserves.

The economic source of the added funds remains incompletely documented. SideSwap thanks Blockstream, the Federation, and its members, but refers readers to the Federation for an explanation of who ultimately bore the cost. Restored backing therefore does not by itself identify who supplied the roughly 602 BTC missing after the initial return. That distinction matters for governance audits and the allocation of responsibility.

Accounting parity does not yet mean normal service

Peg-ins and peg-outs offered by SideSwap are open. The provider performs conversions at a one-for-one ratio, less its standard 0.1% fee. Its peg-out service has operated since October 20, but payouts come from SideSwap’s own Bitcoin wallet, which is refilled manually. If that wallet temporarily runs short of liquidity, a request may remain queued until the next replenishment.

Direct peg-outs managed by the Federation remain restricted, with no public date for full reactivation. Liquid’s recovery note makes that step dependent on completion of remaining security and operational checks. SideSwap markets have been open since September 10, but their price results from buyer and seller orders and is not fixed by the provider. The verifiable November 3 update is therefore narrow: backing has returned, while direct access to reserves and the ordinary operation of every withdrawal route have not yet been fully restored.