“Alloyed $BTC is fully backed again,” Osmosis said. Current pool-liquidity data lists no nBTC among the collateral. The remaining backing consists of WBTC, cbBTC and two bridged WBTC variants, according to the update.
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From a Freeze to a Recovery
The shortfall originated on June 25, when a Nomic bridge-accounting flaw allowed 25 transfers to mint about 40.65 nBTC without corresponding bitcoin backing, according to Johnny Wyles’s forensic report. Nearly 39.84 nBTC entered allBTC’s collateral pool, reducing its real backing to 63.97%. The report says the mint went unnoticed for 74 days, until Nomic’s Sept. 7 halt prompted a backing check.
Validators adopted an emergency upgrade beginning Sept. 7 to freeze the attacker’s remaining 22.65 allBTC. Freezing preserved the tokens but did not authorize their use to repair the pool.
OSMO stakers subsequently approved Proposal 1044, which passed Sept. 20 with 89.63% voting yes and 69.78% turnout. It directly allocated 12.4838 allBTC from the community pool, redirected community-owned bitcoin liquidity to cover the residual gap, and authorized a later upgrade to seize the frozen shares.
The v32 upgrade moved those shares to the Liquidity SubDAO on Oct. 27. The following day’s execution marked nBTC as corrupted, withdrew it and removed it from the alloy.
The rescue did not recover the roughly 18 $BTC-equivalent already extracted from Osmosis. Wyles’s forensic report traced the proceeds into ether, including 671.1 ETH deposited into Tornado Cash. About 0.80 nBTC held outside the alloy also remains Nomic’s liability, according to the recovery update.
App deposits and withdrawals were due to reopen shortly, the update said. Native WBTC still represented about 94% of the pool, above its 75% limit, blocking swaps that add more of that variant; redemptions into WBTC were unaffected. The withdrawn nBTC remains with the Liquidity SubDAO pending a separate burn proposal.
