Backbone Labs' bOSMO Contract Vulnerability Drains Reserves; Osmosis Announces Compensation Plan

Backbone Labs' liquid staking token bOSMO is facing near-exhaustion of its contract reserves following a massive redemption event in the Osmosis community pool. According to information released on the Osmosis forum on October 15, approximately 40,508 OSMO tokens are earmarked to compensate 1,037 accounts. Post author Johnny Wyles revealed that the staking contract has been overpaying on every redemption since at least April 2026: the actual settlement rate stood at roughly 1.676 OSMO per 1 bOSMO, while the contract's advertised rate was only about 1.117 OSMO. The root cause lies in a vulnerability that double-counted OSMO staked on Backbone's own validators, allowing redeemers to withdraw approximately 50% more assets than entitled, with the shortfall ultimately borne by remaining holders.