Liquid Network Keeps Bitcoin Redemptions Frozen as Reserve Deficit Hits 14%

Blockstream's Liquid Network has kept peg-out redemptions of Liquid Bitcoin (LBTC) into native Bitcoin frozen as its reserve stands at roughly 85.8% to 86% backing. The freeze follows a September 6 exploit in the Elements software proof-verification cache that drained up to 4,000 BTC, dropping federation reserves from 4,205 BTC to 197 BTC. A self-described white hat returned approximately 3,400 BTC on September 7, but retained around 600 BTC after Blockstream rejected a 10% bounty. Redemptions remain suspended pending a full 1:1 reserve restoration, key migration to cold storage, and security audits.