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Liquid Network loses 3,996 BTC due to software bug, risking peg stability on Bitcoin sidechain

Market News
07 Sep 2026
Crypto Briefing
View Source
Bearish
Liquid Network loses 3,996 BTC due to software bug, risking peg stability on Bitcoin sidechain

On September 6, a software bug in Blockstream's Elements node caused 3,996 BTC to be withdrawn from the Liquid Network's federation reserves, dropping reserves by 95% from about 4,200 BTC to 197 BTC. This was not a hack but a flaw that bypassed the federation's multi-signature security, triggered during a peg-out process after burning Liquid Bitcoin (L-BTC). The network paused all bridge activity to prevent further losses, but the peg-out mechanism is now at risk due to the depleted reserves, potentially causing a peg discount when peg-outs resume. The actors claim to be white hat security researchers, but no funds have been returned yet. Other assets on Liquid remain unaffected as the bug only impacted BTC peg-outs.

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