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bOSMO bug prompts holder compensation plan as liquidity dries up
A contract flaw in Backbone Labs' liquid-staking token let users redeem about 50% more OSMO than owed, and holders who bought after a key snapshot are on their own
A bug in Backbone Labs’ bOSMO liquid-staking contract on Osmosis has been overpaying redemptions since April 2026. Users could withdraw approximately 50% more OSMO than they were actually entitled to.
Now the Osmosis team has a compensation plan for remaining holders, with one firm catch. Anyone who bought bOSMO after a specific block snapshot will not be compensated.
What broke, and how badly
The contract double-counted the OSMO staked to Backbone’s validator, so it believed it held more than it did.
That accounting error inflated the redemption rate to roughly 1.676 OSMO per bOSMO. The correct figure was closer to 1.117 OSMO per token.
The issue came to a head on 10 October 2026. The community pool, which held about 97% of all bOSMO in existence, executed a single redemption of 776,000 bOSMO.
That transaction extracted approximately 1.3 million OSMO, draining nearly all of the backing left in the contract.
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The snapshot and the compensation plan
Eligible holders will be compensated based on a snapshot taken at block 72,237,940. That block was timestamped at around 02:59 BST on 10 October 2026, the same day as the big redemption.
The Osmosis team plans to begin distributing compensatory OSMO on 24 October 2026. The timing is tied to the unbonding process for the redeemed OSMO, which has to finish before the tokens can be paid out.
The cutoff is strict. bOSMO acquired after block 72,237,940 does not qualify.
Liquidity has evaporated
Recent swaps have returned around 0.06 OSMO for every bOSMO. Compare that with the correct backing rate of about 1.117 OSMO, and the gap tells the story.
What this means for holders and for Osmosis
For snapshot-eligible holders, the immediate question is execution. The 24 October 2026 distribution date depends on unbonding completing as expected.
For post-snapshot buyers, the picture is bleak. They hold a thinly traded token with no compensation path and swap rates far below fair backing.
Because the community pool held about 97% of bOSMO, a single coordinated redemption could stop the bleeding quickly. A widely distributed token could not have done the same in one transaction.