SideSwap, a swap service built on the Liquid Network, has resumed conversions from the synthetic Bitcoin token L-BTC into Bitcoin.
However, direct withdrawals from the Liquid Federation—the entity overseeing the network’s Bitcoin reserves—remain restricted. SideSwap’s payouts may still queue during refills of its own Bitcoin wallet.
In an update issued on October 21, SideSwap reported that users had executed approximately 600 peg-outs, with over 60 BTC distributed since reopening on October 20.
According to Liquid’s assessment dated September 23, Blockstream identified an Elements verification-cache flaw that generated roughly 4,000 unbacked L-BTC and caused Bitcoin to exit Liquid’s reserve via SideSwap.
What holders receive, and why they may wait
Under SideSwap’s reopening conditions, holders transfer L-BTC and receive Bitcoin at a quoted 1:1 ratio minus the provider’s standard 0.1% fee. The service is accessible through its app or website, and wallets integrating SideSwap’s service may apply additional fees.
Currently, SideSwap states it pays users from its own Bitcoin wallet while converting received L-BTC into Bitcoin in bulk.
This approach decouples individual conversions from the replenishment of the provider’s inventory. Users supply L-BTC, but the Bitcoin for payment must be present in SideSwap’s wallet as the Federation’s withdrawal pathway remains constrained.
These bulk refills are still partially manual. When a refill is pending, peg-outs are queued and processed in arrival order once Bitcoin arrives in the wallet.
SideSwap confirms that waiting peg-outs are not forfeited and require no user action. Its October 21 update does not specify a maximum wait time, leaving holders with an active conversion channel but no defined deadline for queued payments.
The quoted exchange rate is independent of L-BTC’s USDT price on SideSwap’s order books, which is determined by market participants. This rate also does not signify that Liquid’s full reserve backing has been restored.
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The Federation’s October 20 recovery update outlines semi-automated swaps through participating providers without protocol-level volume caps.
Direct Federation withdrawals await a separate restart. The Federation states its final restoration phase requires reestablishing complete 1:1 Bitcoin backing, followed by a controlled reactivation of peg-outs for authorized peg-out key holders.
Completion continues to depend on fulfilling security and operational requirements. The Federation’s October 20 statement and SideSwap’s October 21 update do not provide a timeframe for this final stage.
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