Backbone Labs’ liquid staking token bOSMO is facing a near-exhausted contract backing after a large redemption tied to the Osmosis community pool. A disclosure posted on the Osmosis forum on Oct. 15 said about 40,508 OSMO had been designated to compensate 1,037 accounts.
According to the post by Johnny Wyles, the staking contract had been overpaying on every redemption since at least April 2026. Redemptions were reportedly settled at roughly 1.676 OSMO for each bOSMO, even though the contract stated an exchange rate of about 1.117 OSMO. The issue came from counting OSMO staked with Backbone’s own validator more than once, allowing redeemers to receive around 50% more assets while diluting the backing for remaining holders.
The defect surfaced as the community pool position was being unwound under governance proposal 1049. That proposal authorized the withdrawal of vault positions managed by Margined and the destruction of recovered OSMO as it exited liquidity management. The bOSMO vault held about 1.137 million bOSMO, or roughly 97% of total supply. A redemption executed at 21:59 ET on Oct. 9 burned 776,000 bOSMO and began unbonding about 1.3 million OSMO. Compensation will use eligible balances at block 72,237,940 and a rate of 1.1174 OSMO per bOSMO.
Backbone Labs’ liquid staking token bOSMO is left with backing that is nearly exhausted after a large redemption from the Osmosis community pool.
Forum disclosure details overpayment issue
A disclosure published on the Osmosis forum on Oct. 15 said about 40,508 OSMO had been earmarked to compensate 1,037 accounts. The author of the post, Johnny Wyles, said the staking contract had overpaid on every redemption since at least April 2026.
Under the disclosure, redemptions were actually being settled at roughly 1.676 OSMO for 1 bOSMO, while the contract’s stated exchange rate was about 1.117 OSMO. The bug reportedly double-counted OSMO staked with Backbone’s own validator, letting redeemers receive about 50% more assets and diluting the backing for holders who remained in the system.
Issue surfaced during community pool unwind
The defect came to light while the community pool position was being prepared for liquidation. Governance proposal 1049, which had already passed, authorized the withdrawal of vault positions managed by Margined and the burning of recovered OSMO once it ended its liquidity management business.
The disclosure said the pool’s bOSMO vault held about 1.137 million bOSMO, representing around 97% of the token’s total supply. A redemption transaction executed at 21:59 ET on Oct. 9 burned 776,000 bOSMO and started the unbonding of about 1.3 million OSMO.
Compensation based on snapshot balances
Compensation will be calculated using eligible balances at block 72,237,940, at a rate of 1.1174 OSMO per 1 bOSMO. bOSMO purchased after the snapshot will not qualify for compensation. Beneficial holders whose positions were placed in liquidity pools and other contracts are also included.
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