Summary
The Liquid Network has announced the return of the peg in stages. The first stage is now. Swaps between bitcoin and L-BTC are, in the announcement's words, "being enabled in coordination with participating swap providers, without protocol-imposed volume limits", and SideSwap is one of those providers. The final stage brings the Federation's bitcoin backing back to one to one, after which the network's own peg-outs return.
From today peg-out through SideSwap is open again. You send L-BTC and receive bitcoin, one to one less our standard fee of 0.1 percent, the same fee as peg-in. Peg-in is open, as it has been since 11 September.
What has happened
On 6 September a flaw in the Elements software let a party create about 4,000 L-BTC from nothing and take them out of the network as bitcoin through our peg-out service. Our statement of 9 September is our account of that day and of our part in it, and we stand by it.
Since then the Liquid Federation, Blockstream and independent security experts have, in the announcement's words, worked "to strengthen network security, refactor network accounting, and validate the safeguards necessary for the safe resumption of full operations". Blockstream's assessment of 23 September sets out the cause and the fix in Elements 23.3.4. The Federation software that manages the network's bitcoin reserve has now been updated on enough functionaries for the next phase of recovery, with safeguards still in place against any premature or unauthorised peg-out.
The Liquid Network's announcement of 20 October sets out the stages. Swaps between bitcoin and L-BTC through swap providers come first, which in the announcement's words will "restore a practical means of converting LBTC to BTC, even while direct Federation peg-outs remain restricted". The final stage brings the network's bitcoin backing back to one to one and reactivates peg-outs for the holders of peg-out authorisation keys, with the reserves monitored through the block explorers, once the remaining security and operational requirements are met. No date is given. We refer readers to the announcement rather than add to it.
We thank Blockstream, the Liquid Federation and its members for the work since September, and the Liquid community for its patience.
Peg-out at SideSwap
You peg out as before, from the SideSwap app or from sideswap.io/peg-in-out. You send L-BTC and receive bitcoin. The rate is one to one less our standard fee of 0.1 percent, so for every 1 L-BTC you send you receive 1 BTC less the fee. The terms of the service are shown on that page. A wallet that uses our service may add a fee of its own, which is not ours.
What has changed is behind the service, not in front of it. The Federation's own peg-outs remain restricted for now, so every payout comes from SideSwap's own Bitcoin wallet, and the L-BTC we take in is swapped for bitcoin in bulk under the arrangement the Liquid Network describes in its announcement. When the Federation's peg-outs return the service carries on and the bulk swaps give way to Federation peg-outs behind it.
SideSwap's markets have been open since 10 September. They are open order books, and the price of L-BTC against USDt on them is whatever buyers and sellers agree. We do not set it and we do not peg it.
Peg-in
Peg-in works as it always has. The ratio is one to one, and for every 1 BTC you send, 1 L-BTC less our standard fee of 0.1 percent is credited to your Liquid wallet. Peg in from the SideSwap app or from sideswap.io/peg-in-out.
The caution we gave on 11 September, that for many users it may make sense to wait, was about peg-out being closed. It is open again.
What it means for L-BTC
L-BTC is bitcoin on Liquid. The Liquid Network has said that the final stage of the restoration brings the Federation's bitcoin backing back to one to one. Both figures, the L-BTC in circulation and the bitcoin in the reserve, are public and live on liquid.network, and anyone can check them at any time.
Wallets, keys and balances were never involved in the incident and are unaffected. Other assets on Liquid, including USDt and DePix, are issued and backed by their own issuers and were not affected. Network fees continue to be paid in L-BTC.
Practical points
Nothing is required of users. SideSwap is non custodial, and wallets, keys and balances are unaffected. If a peg-in or peg-out from before 6 September has still not completed, email [email protected] with the transaction id.
What comes next
When the Liquid Network announces the final stage, the backing at one to one and peg-outs reactivated, we will publish a short note with the liquid.network figures of that day. We will post updates on x.com/side_swap and t.me/SideSwap_io as things move. We will not comment on the recovery efforts or on who was behind the incident beyond what the Liquid Network and Blockstream publish.
About SideSwap
SideSwap is a non custodial exchange and wallet built on the Liquid Network, focused on atomic swaps, self custody, and open blockchain based capital markets rooted in Bitcoin.
Inquiries: [email protected]
Earlier notes: statement of 9 September, markets reopen, 10 September, peg-ins open again, 11 September