On Oct. 16, Osmosis Community Hall disclosed a redemption contract bug in bOSMO, a liquid staking token issued by Backbone Labs.
According to the disclosure, since April 2026 the contract has repeatedly counted OSMO staked by Backbone’s own validator each time a redemption took place. That caused redeeming users to receive about 50% more OSMO than they were entitled to, with the extra payout effectively borne by other bOSMO holders.
Redemption and compensation plan
To avoid causing further harm to other holders when a community pool redemption was processed, the parties involved redeemed about 776,000 bOSMO in a single transaction on Oct. 10 and withdrew about 1.2997 million OSMO. The OSMO involved in that redemption is expected to finish unbonding on Oct. 24.
Osmosis said it will compensate the 1,037 accounts that were holding bOSMO at the time of the snapshot. The payout will use the pre-redemption exchange rate of 1.1174 OSMO for each bOSMO, for a total of about 40,508 OSMO. The funds will be distributed automatically after unbonding is completed on Oct. 24, and users do not need to take any action.
Current redemption value and warning to users
After the redemption, however, the asset backing behind bOSMO has dropped sharply. At present, redeeming through Backbone returns only about 0.06 OSMO for each bOSMO.
Because the bug has not yet been fixed, the market can still mint new bOSMO at a cost of about 0.039 OSMO. Osmosis said pricing in some liquidity pools may therefore sit well above actual redemption value.
Osmosis advised users not to buy bOSMO or provide liquidity to related pools. Existing liquidity providers were also advised to withdraw their funds.