Osmosis Halts AllBTC Activity Amid Critical Forwarding Bug
Osmosis has discovered a critical flaw in its Nomic forwarding system that compromised the Bitcoin reserves backing its allBTC asset. The issue allowed for a double-spend, leaving part of the allBTC's backing unsecured.
The bug was identified after an on-chain researcher found that 22.65 BTC had been created through false vouchers, putting 36.03% of allBTC's backing in question. This left approximately 70.73 BTC-equivalent of other backing to cover the shortfall.
Osmosis has frozen both Nomic and allBTC inflows and outflows, as well as paused allBTC minting and redemption, while governance weighs options for recovery. The team plans to ask governance to confiscate the 22.65 BTC and use community pool funds to cover the remaining balance.
The incident highlights concerns around DeFi's reliance on complex systems and the potential risks of smart contract bugs.