SideSwap reopens L-BTC swaps into Bitcoin as Federation withdrawals remain restricted

SideSwap, a Liquid Network swap provider, resumed conversions of the synthetic Bitcoin token L-BTC into Bitcoin on October 20. Direct withdrawals through the Liquid Federation, the manager of the network's Bitcoin reserves, remain restricted. SideSwap's October 21 update said users had initiated about 600 peg-outs since the reopening. SideSwap said payouts over that period exceeded 60 BTC.

Under the reopening terms, holders exchange L-BTC for Bitcoin at a quoted rate of 1:1, minus SideSwap's standard 0.1% fee. Users can access the service through SideSwap's website or app. A wallet offering access to SideSwap may charge an additional fee. Buyers and sellers determine L-BTC's USDT price on SideSwap's order books independently of the quoted conversion rate. The service's conversion rate does not demonstrate that Liquid has recovered full reserve backing.

SideSwap says payments come from SideSwap's own Bitcoin wallet. SideSwap says the provider exchanges incoming L-BTC for Bitcoin through bulk transactions. Customer conversions therefore occur separately from replenishment of SideSwap's inventory. SideSwap's wallet must contain the Bitcoin needed for payment while direct Federation withdrawals remain restricted. Bulk replenishment still involves some manual processing. Peg-outs awaiting a refill enter a queue and receive payment in arrival order after Bitcoin reaches the wallet. SideSwap says queued peg-outs remain valid and users need not take further action. SideSwap's October 21 update specifies no maximum waiting period for queued payments.

Blockstream said in Liquid's September 23 assessment that an Elements verification-cache flaw produced approximately 4,000 L-BTC without backing. Blockstream said the flaw also caused Bitcoin to leave Liquid's reserve via SideSwap.

The Federation's October 20 recovery update describes semi-automated swaps offered by participating providers, with no protocol-imposed limits on volume. The Federation says the final restoration phase requires full 1:1 Bitcoin backing before controlled reactivation of peg-outs for authorized peg-out key holders. Restarting direct Federation withdrawals also depends on satisfying security and operational requirements. Neither the Federation's October 20 statement nor SideSwap's October 21 update specifies a date for that final phase.