The Osmosis community has introduced a proposal aimed at restoring the peg of Alloyed BTC (allBTC) after a shortfall tied to unbacked nBTC minted through the Nomic bridge. Under the plan, the community would approve a future software upgrade to seize stolen assets frozen in attacker-controlled addresses and use BTC and allBTC held in the Osmosis community pool to cover the remaining gap.
According to the proposal, the Nomic cross-chain bridge minted 40.65 nBTC on Osmosis on June 25, 2026, without Bitcoin backing. The issue remained hidden for 74 days and came to light when Nomic paused on Sept. 7. The incident left a total deficit of 39.84 BTC. Of that amount, about 22.65 BTC worth of assets was frozen in attacker addresses through emergency upgrade v31.1.0, while the remaining roughly 18 BTC was laundered through Tornado Cash and cannot be directly recovered.
The proposal lays out four steps: intercepting USDC.noble-to-allUSDC conversion liquidity to free up an estimated 7.75 BTC from the community pool, allocating about 12.48 allBTC from the pool to the liquidity subDAO, transferring the frozen 22.65 allBTC to that subDAO, and marking nBTC as impaired in the allBTC converter before withdrawing and burning it. Deposits and withdrawals for allBTC on Osmosis would resume after the balance reaches zero and nBTC is removed from the basket.
The Osmosis community has put forward a proposal to restore the peg of Alloyed BTC (allBTC) by approving a future software upgrade to seize stolen assets held in attacker addresses and by using BTC from the Osmosis community pool to absorb the remaining unpegged nBTC.
According to the proposal, the Nomic cross-chain bridge minted 40.65 nBTC on Osmosis on June 25, 2026, without Bitcoin backing. The issue remained hidden for 74 days and was exposed after Nomic paused on Sept. 7, leaving a total shortfall of 39.84 BTC.
About 22.65 BTC worth of assets has already been frozen in attacker addresses through emergency upgrade v31.1.0. The remaining roughly 18 BTC was laundered through Tornado Cash and cannot be directly recovered.
The proposal sets out four actions
- Intercept liquidity for conversions from USDC.noble to allUSDC and release BTC held in the community pool to support repegging, with an estimated 7.75 BTC available;
- Allocate about 12.48 allBTC from the community pool to the liquidity subDAO to fill the gap;
- Approve the transfer of the frozen 22.65 allBTC from attacker addresses to the liquidity subDAO for repegging;
- Mark nBTC as impaired in the allBTC converter, withdraw and burn it, and then restore allBTC deposits and withdrawals on Osmosis once the balance reaches zero and nBTC is removed from the basket.
The proposal is designed to close the remaining gap through a combination of community pool resources and frozen assets, with the aim of restoring the allBTC peg.
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