Osmosis Alloyed BTC Operated with 36% Collateral Shortage for 74 Days

Osmosis's Alloyed BTC has been operating with a 36% shortage of actual collateral for 74 days. This is the result of a flaw in Nomics' IBC processing, which led to the issuance of collateral-free nBTC. On June 25, the Nomics bridge processed 25 IBC transfers, issuing nBTC worth 40.650602 BTC, of which 39.839746 BTC was included in Alloyed BTC. The total assets of Alloyed BTC amounted to 110.570944 BTC, but the actual collateral was only 70.731198 BTC, resulting in a collateral ratio of 63.97%. Nomics is a network that issues nBTC based on Bitcoin deposits, claiming that nBTC is collateralized 1:1 with Bitcoin in a public repository. However, due to a flaw in the IBC transfer path, Osmosis recognized it as a normal transfer. An attacker managed to withdraw approximately 18 BTC from the issued amount and moved it to Ethereum, with 671.1 ETH analyzed to have been transferred to Tornado Cash. The remaining 22.650608 allBTC was left in the attacker's address and was frozen due to Osmosis's emergency upgrade. Osmosis proposed to recover the frozen 22.65 BTC and supplement the shortage with Bitcoin from the community pool. If the collateral ratio is not restored, the timing of asset repayment and the resumption of deposits and withdrawals may be subject to governance decisions. The current status of nBTC repayment resumption is undecided.

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