Chase

Update from the Federation: BTC<>LBTC swaps were re-enabled last week as part of Liquid’s staged recovery. Users can once again swap between BTC on Bitcoin and LBTC on Liquid at 1:1 through participating providers, including @AquaBitcoin, @BULLBITCOIN_ and @side_swap. These providers collectively accounted for 99% of peg-out volume prior to the incident. Normal Federation peg-out operations remain subject to enhanced operational controls while security hardening continues and the independent security audit nears completion. The community can track progress toward restoring full 1:1 BTC backing for LBTC through Liquid’s auditable Proof of Reserves at liquid.network.

Liquid Network Restoration Update With key technical milestones completed and network operations stable, user swap functionality is now restored with semi-automated swaps for Federation members. Normal peg and balance validation will be reinstated soon. The Liquid Network’s members appreciate the broader Bitcoin community’s support and advocacy as we work to not only provide the restoration, but also harden the network’s security structure. blog.liquid.net/liquid-netwo…

LIQUID NETWORK UPDATE: ECOSYSTEM ACTIVITY Status as of September 17, 2026, 21:05 UTC Network and Ecosystem Status Since resuming on September 10, block production and network transactions, including LBTC transfers, have operated normally. Peg-out operations remain paused while work continues with Federation members and partners toward their safe restoration. Markets and services across the ecosystem are back online. @mifielfirma has resumed the issuance and transactions of its digital promissory notes, with batches confirming normally. At the exchange level, @BTSE_Official reports that its platform has re-enabled USDT-Liquid transfers and the asset is unaffected by the incident. @AquaBitcoin reports that Liquid asset transfers and peg-ins are available. Its new swap feature, Indra, is also live, enabling swaps between LBTC and Lightning BTC, although liquidity remains limited. Other wallets are restoring core functionality as well. @BULLBITCOIN_ and the @Blockstream App report that Liquid asset transfers are available, although LBTC<>BTC and LBTC<>Lightning swap routes on those services remain unavailable until peg-outs are restored. Meanwhile, other non-LBTC swap services are returning, with @sideshiftai re-enabling cross-chain swaps for $USDT and $DEPIX on Liquid. Please note service availability varies by provider, and users should confirm deposit, withdrawal and swap availability through each provider’s official channels. BTC Recovery and Peg-Outs As previously reported, 3,400 BTC of the ~4,000 BTC withdrawn on September 6 has been returned to the Federation reserve. Approximately 600 BTC remains unreturned, and efforts to pursue its recovery continue. We understand that the central question for LBTC holders is when peg-outs will resume. While we are not yet able to provide a firm date, peg-outs will resume only after full 1:1 BTC backing for LBTC has been confirmed and all required software updates, testing and independent security reviews have been completed. The Liquid Federation members and Blockstream will share the plan and timing for resuming peg-outs as soon as they are finalized. Technical Post-Mortem The root cause and exploit path have been identified, and the immediate fix was released in Elements v23.3.4. A comprehensive technical report detailing the incident will be released as soon as it is available. Thank You The Liquid Federation and Blockstream sincerely thank Federation member companies, ecosystem operators, developers, security researchers, and users for their continued work, patience and support throughout the recovery process.

LIQUID NETWORK UPDATE: TRANSACTIONS RESUMED, PEG-OUTS DISABLED Status as of September 10, 2026, 19:55 UTC Recovery Status The Liquid Network has entered into its next recovery phase. Block production has resumed, and functionary nodes are signing and validating blocks. Transactions on the network have resumed, while peg-outs remain disabled as a precautionary measure while the final stage of recovery continues. Rigorous testing, AI-assisted code scanning, and continuous network monitoring are underway by internal and external teams. Further information on the resumption of peg-outs will be shared once available. Important: What You Should Know Users do not need to take any proactive steps at this time. If you operate a Liquid node, please update to Elements v23.3.4 immediately. Reminder: Beware of Scams There are reports of scammers attempting to exploit the situation through fraudulent update sites and messages. Please rely only on official Liquid Network, Blockstream Jade, and Blockstream channels. Never send funds to unfamiliar addresses, transfer assets to unknown channels, or disclose private keys or seed phrases in response to unsolicited communications. More Updates Soon Updates will be shared through official Liquid Network and Blockstream channels. The Liquid Federation and Blockstream again sincerely thank the broader Bitcoin community for its continued assistance and support during this recovery.

LIQUID NETWORK UPDATE: OPERATIONS RESUMED, RECOVERY ONGOING Status as of September 10, 2026, 10:00 UTC Recovery Status The Liquid Network has entered the next phase of its controlled resumption. As a precautionary measure, block production has resumed without transactions while the network is monitored to confirm full stabilization. Blockstream confirms that the required functionary and bridge node updates have been successfully deployed. Functionary nodes are signing and validating blocks as intended. Peg operations, including PAK-authorized peg-outs, remain suspended while work continues on the final recovery stage: restoring the BTC/LBTC reserve is in progress. Reminder: Beware of Scams There are reports of scammers attempting to exploit the situation through fraudulent update sites and messages. Please rely only on official Liquid Network and Blockstream channels. Never send funds or disclose private keys or seed phrases in response to unsolicited communications. Thank You The Liquid Federation and Blockstream sincerely thank the broader Bitcoin community and security teams for their assistance and continued support during this challenging time. Safely restoring full operations remains the highest priority.

LIQUID NETWORK UPDATE: NEW RELEASE Status as of September 9, 2026, 13:30 UTC Update to Elements v23.3.4 The emergency Elements v23.3.4 release is now available. Functionary nodes are being updated immediately and we recommend all Liquid node runners do the same. This release addresses the proof-verification cache vulnerability, hardening the cache keys used for range proofs. Elements v23.3.4 has undergone multiple rounds of internal and external review, including by the Bitcoin Red Team, Alpen Labs and others. Blockstream sincerely thanks these teams for their valuable review and collaboration. Liquid Network Recovery Plan The recovery plan remains under active development and may be revised as testing and validation continue. Based on current assessments, the anticipated stages are: 1) Resume block production while peg operations remain suspended. 2) Replay transactions verified as valid. 3) Resume peg operations once the network state has been fully restored including a return of funds. Blockstream is testing the procedures for the first two stages in parallel. While the current plan anticipates proceeding in the order above, the sequencing and implementation may be adjusted based on the results. No stage will proceed until it is considered safe to advance. Beware of Scams There are reports of scammers attempting to exploit this situation by misleading users with fake update sites. This is a reminder to only rely on official Liquid Network and Blockstream channels, and never send funds or disclose private keys or seed phrases in response to unsolicited messages. We again thank the broader Bitcoin community and our research collaborators for their continued support and assistance. Safely restoring normal operations remains the highest priority for the Liquid Federation and Blockstream. github.com/ElementsProject/e…

LIQUID NETWORK UPDATE: INCIDENT REPORT Status as of September 8, 2026, 19:10 UTC What Happened? On September 6, 2026 at 15:53:10 UTC (Liquid block 4,050,336), a vulnerability in the open-source Elements software related to how Liquid nodes cache range proof verifications was exploited, resulting in the creation of ~4,000 LBTC that were not backed by bitcoin held in reserve. The individual(s) responsible for the exploit then used the SideSwap service, a Liquid Federation member that holds a peg-out authorization (PAK) key, to convert the unbacked LBTC to BTC via Liquid’s standard peg-out mechanism. Because the validation failure occurred at the transaction level before the peg-out was initiated, both SideSwap’s node and the Liquid Network’s globally distributed functionary nodes accepted the LBTC as valid. The functionaries processed the peg-out as authorized, releasing approximately 4,000 BTC through SideSwap’s whitelisted bitcoin address, which SideSwap then forwarded to the address specified by the exploiters. Before the incident, the Liquid reserve held approximately 4,205 BTC. Following this peg-out and additional peg-outs processed before operations were halted, the reserve balance fell to 197 BTC. Key Clarifications No keys were compromised. The Liquid Federation functionaries were not hacked, and no private keys were compromised. The peg-out mechanism that authorizes withdrawals to whitelisted addresses operated as designed. Other Liquid-issued assets were not affected. USDT and other tokens issued on the Liquid Network were not impacted by the vulnerability, though they are temporarily unavailable while the network remains paused. Investigation is ongoing. As is common in complex critical-system failure investigations, this incident arose from the convergence of several individually low-probability factors that interacted in ways that ultimately defeated the system's built-in redundancies. More detail will be shared in forthcoming communications. What Steps Have Been Taken To Recover The Assets? The individual(s) responsible for the exploit left a public message on the bitcoin mainchain identifying themselves as white-hat security researchers and requesting contact to address the vulnerability. Patch deployed. Blockstream identified and deployed a patch to the Liquid Network’s bridge nodes, which was completed on September 7 at 01:09 UTC, ensuring the vulnerability is no longer exploitable. Partial fund recovery. On September 7 at 16:09:25 UTC (Liquid block 965,950), the exploiters returned 3,400 BTC to the Liquid Federation peg wallet. Approximately 598.5 BTC (15% of the total) remains outstanding. Discussions between Blockstream and the individuals responsible are ongoing to secure the return of the remaining funds. What Comes Next? Our immediate priorities are recovering the remaining funds and resuming normal network operations safely and as quickly as possible. Software update in progress. A fix for the exploited vulnerability has been developed and is undergoing multiple rounds of internal and external review. Blockstream is preparing an emergency release of Elements (v23.3.4), which is expected to be released as soon as possible, but within approximately 48 hours. Network restoration. Once the software update is finalized, Liquid Network functionary operators will perform additional adjustments to resume full functionality and restore the corrected network state, including rejection of the invalid peg-out. Ongoing updates. We will continue to provide detailed updates as the situation progresses. What You Should Know The Liquid Network remains offline at this time, while we work on reviewing the security fixes and network resumption code and coordinate with the white hat hacker towards timely resumption of the network with 1:1 backing for BTC. While the network is paused, users cannot transact on Liquid. If you operate a Liquid node, please watch for the emergency Elements release and follow the upgrade instructions when available. Users do not need to take any proactive steps to protect their funds at this time. The Liquid Federation and its members are committed to resolving this incident in coordination with Blockstream and to resuming normal operations as soon as it is safe to do so.

We are aware of a security incident on @Liquid_BTC. Purported white-hat hackers have withdrawn ~4,000 BTC (~$320 million) from the Liquid Federation wallet. The @Blockstream team is working on contacting them on-chain with a signed message. What we know so far is that the funds were withdrawn via the SideSwap PAK (Peg-out Authorization Key), but that key was not compromised, nor were any others. Exchanges have been notified and have already paused (or will pause) LBTC deposits and withdrawals. Other Liquid assets such as USDT, DePix, and RWAs are unaffected by this security incident. Bridge nodes have been temporarily disabled, so no new transactions can be submitted to the network. Effectively, the Liquid sidechain is paused until this issue is resolved. Liquid wallets will be impacted, and we're sorry for any inconvenience. Federation members are actively working on resolving this so we can restore normal network activity. You can monitor the situation via @mempool's liquid.network site below: mempool.space/address/bc1qdl…