Osmosis Community Proposal to Restore allBTC Peg through Community Pool and Seized Assets

The Osmosis community has initiated a proposal to approve a software upgrade that will seize stolen assets from the attackers' addresses and utilize the BTC holdings in the community pool to absorb the remaining unpegged nBTC, thereby restoring the peg of Alloyed BTC (allBTC). The proposal mentions that on June 25, 2026, the Nomic cross-chain bridge minted 40.65 nBTC unsupported by Bitcoin on Osmosis, which was exposed 74 days later due to Nomic's suspension on September 7, resulting in a total shortfall of 39.84 BTC, of which approximately 22.65 BTC has been frozen in the attackers' addresses, and about 18 BTC has been laundered through Tornado Cash, making it impossible to recover directly. The specific actions outlined in the proposal include: intercepting the liquidity of the conversion from USDC.noble to allUSDC, releasing BTC from the community pool to fund the re-pegging, which is expected to provide 7.75 BTC; allocating the community pool's allBTC funds (approximately 12.48 BTC) to the liquidity subDAO to fill the gap; approving the transfer of the 22.65 BTC of allBTC frozen from the attackers to the liquidity subDAO for re-pegging; marking nBTC as damaged in the allBTC converter and withdrawing it for destruction, with the restoration of allBTC deposit and withdrawal functions on Osmosis to occur after the balance reaches zero and nBTC is removed from the asset pool.