36% of Bitcoin backing for Osmosis allBTC token is missing due to a bridge flaw, risking investor holdings.

A bridge flaw has left 36% of the Bitcoin backing for Osmosis’ allBTC token missing, according to Pluang. The shortfall creates a risk for holders because allBTC is intended to represent Bitcoin-backed value within the Osmosis ecosystem.

Osmosis is a decentralized exchange and application network in the Cosmos ecosystem, where users can trade and use tokens across connected blockchains. Assets such as Bitcoin are typically brought into these environments through bridging systems that lock, custody, or otherwise account for the original asset while issuing a corresponding token on another network.

When a bridged token’s stated backing is incomplete or unavailable, its ability to maintain a one-to-one relationship with the referenced asset can be called into question. In this case, the reported missing Bitcoin backing affects more than one-third of the collateral associated with allBTC and may expose investors to losses or uncertainty over redemption.

The incident also highlights the operational and security risks associated with cross-chain bridges. Bridges are used to move value between networks, but flaws in their design, implementation, custody arrangements, or accounting can affect the assets represented on the destination chain. The reported issue places attention on the status of allBTC’s backing and the potential impact on its holders.