Liquid has restarted block production after an exploit drained 4,000 BTC from its federation wallet, but transactions and peg operations have not fully resumed. The network, a sidechain launched by Blockstream in 2018, said blocks were being produced without transactions as it monitored stability. Peg operations, including PAK-authorized peg-outs, remain suspended while the BTC/LBTC reserve is restored. The white-hat hacker returned 3,400 BTC but retained almost 600 BTC and demanded a 10% bounty, threatening to keep the outstanding funds if the payment was not made. Blockstream founder and CEO Adam Back said L-BTC, which represents BTC on Liquid, would be covered 1:1, allowing holders to withdraw equivalent BTC on the Bitcoin network. He did not explain how the reserve shortfall would be funded when peg-outs restart. Blockstream is pursuing recovery of the remaining funds and working on system updates, without giving a timetable. On September 9, the hacker criticized Blockstream’s security budget, saying the company had allocated $1.5 million to protect $5 billion in assets.