Backbone Labs bOSMO Contract Vulnerability Leads to Exhaustion of Support, Osmosis Announces Compensation Plan

Backbone Labs' liquid staking token bOSMO faced near exhaustion of contract support after a large redemption was completed in the Osmosis community pool. On October 15, the Osmosis forum disclosed that approximately 40,508 OSMO were designated for compensating 1,037 accounts. The staking contract has been overpaying for each redemption since at least April 2026, settling at about 1.676 OSMO per bOSMO, while the declared exchange rate of the contract was approximately 1.117 OSMO. This vulnerability allowed redeemers to receive about 50% more assets, diluting the support for remaining holders. The defect was exposed while preparing to liquidate the community pool position, and governance proposal 1049 authorized the withdrawal of the positions managed by Margined and the destruction of the recovered OSMO upon the conclusion of liquidity management. The bOSMO treasury of this pool held approximately 1.137 million bOSMO, accounting for about 97% of the total supply of the token; the redemption transaction executed on October 9 at 21:59 ET destroyed 776,000 bOSMO and began unbinding about 1.3 million OSMO. Compensation is based on the qualified balance at block 72,237,940, calculated at 1.1174 OSMO per bOSMO, with bOSMO purchased after the snapshot not included in the compensation, and underlying holders in liquidity pools and other contracts also being included.

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