Osmosis has frozen 22.65 BTC after a bug in Nomic's custom forwarding system enabled a double-spend that left the allBTC asset partly unbacked by Bitcoin reserves.
allBTC is issued against a basket of Bitcoin variants held on Osmosis, including nBTC from the Nomic bridge. At the time of disclosure, 110.57 allBTC was in circulation with 39.84 nBTC in the backing basket. The nBTC was created from false vouchers, putting 36.03% of allBTC's backing in question and leaving approximately 70.73 BTC-equivalent of other backing.
Osmosis confirmed that neither its chain nor the Inter-Blockchain Communication protocol was compromised. The vulnerability was isolated to Nomic's forwarding logic. On-chain researcher Rarma traced the principal minting activity to June 25, with 22.65060846 allBTC created during July 17 activity remaining unmoved when traced.
Nomic and allBTC inflows and outflows have been frozen, while allBTC minting and redemption are paused. These restrictions block entry and exit through the affected functions pending resolution of the backing gap.
Governance Decision Required
The frozen BTC has not been seized or returned to the basket. Osmosis plans to ask governance to confiscate the 22.65 BTC and use Bitcoin accumulated in the community pool to cover the remainder. If governance recovers the full frozen amount, approximately 17.19 BTC would still be needed to replace the 39.84 BTC impairment.
Osmosis governance administers the allBTC contract, while a 3-of-6 moderator subDAO can pause the pool or mark assets as corrupted. Until sufficient valid backing is restored, allBTC holders remain collectively exposed as claims on the basket exceed its valid BTC-equivalent assets. Full-parity redemption depends on the governance decision and community-pool contribution size.
