Osmosis Freezes 22.65 BTC After Nomic Forwarding Bug Undermines Bitcoin Backing

Osmosis has frozen 22.65 BTC after a bug in Nomic’s forwarding system caused a double‑spend, compromising the Bitcoin backing of the allBTC token.

Impact on allBTC Backing

allBTC is minted against a basket of Bitcoin variants held on Osmosis, including nBTC from the Nomic bridge. At the reporting cutoff the allBTC dashboard showed 110.57 allBTC in circulation and 39.84 nBTC in the basket. The bug created false vouchers for nBTC, putting 36.03% of allBTC’s backing into question and leaving roughly 70.73 BTC‑equivalent of other assets as valid backing.

Technical Details of the Exploit

The issue originated in Nomic’s custom forwarding logic, not in Osmosis’s chain or the Inter‑Blockchain Communication (IBC) protocol. SlowMist’s incident database classified the event as a Nomic bridge double‑spend. On‑chain researcher Rarma traced the minting activity to June 25, noting that 22.65060846 allBTC created during the July 17 activity remained unmoved when the trace was published.

Immediate Response

• All Nomic and allBTC inflows and outflows have been frozen.
• Minting and redemption of allBTC are paused.
• The affected functions are blocked while the backing gap remains unresolved.

Governance Path Forward

Osmosis plans to ask its governance to confiscate the frozen 22.65 BTC and use Bitcoin from the community pool to cover the shortfall. Even if the full amount is recovered, an additional 17.19 BTC would be needed to replace the 39.84 BTC impairment. No matching seizure or recapitalisation measure appears among the latest 20 on‑chain proposals as of September 9.

Risk to allBTC Holders

Until valid backing is restored, allBTC holders are collectively exposed because claims on the basket exceed the verified BTC‑equivalent assets. This does not constitute an immediate haircut, but redemption at full parity now depends on the outcome of governance decisions and any community‑pool contributions.