The Liquid Network has resumed controlled block production four days after a consensus bug in the open-source Elements software enabled attackers to create about 4,000 unbacked LBTC and withdraw roughly 4,000 BTC from the federation reserve. Block production is operating without user transactions while functionary and bridge nodes are monitored and updated, but peg-in and peg-out operations remain frozen. Blockstream Chief Executive Officer Adam Back said the 1:1 LBTC-to-BTC peg will be covered and urged holders not to panic-sell LBTC over-the-counter. The federation reserve fell from approximately 4,205 BTC to 197 BTC after the exploit and other peg-outs, although actors identifying themselves as whitehats returned 3,400 BTC. About 598.5 BTC, worth roughly $47 million at the time, remains outstanding. The Elements v23.3.4 emergency release hardens cache keys used for range proofs. Liquid plans to replay verified transactions and restore peg operations only after testing confirms the network state and reserve have been restored, including the return of funds. The incident exposed how a federated security model can fail when transaction-validation software accepts unbacked assets, while Bitcoin’s base chain itself was not compromised. Until peg-outs reopen against a reserve matching circulating LBTC, the token remains a claim on a paused bridge rather than a functioning 1:1 Bitcoin equivalent.