- Balancer Labs shuts down following a $128 million exploit in November 2025
- Protocol will continue operating under a lean restructuring model
- Exploit caused by rounding flaw in Balancer v2 swap logic across chains
- DAO, foundation, and service providers to replace corporate structure
- Tokenomics overhaul planned, including ending BAL emissions and veBAL model
Balancer Labs, the corporate entity behind the decentralized finance (DeFi) protocol Balancer, is shutting down operations following a major security incident that resulted in losses exceeding $128 million. Co-founder Fernando Martinelli announced the decision in a forum post on Monday, citing ongoing legal exposure stemming from the Nov. 3, 2025 exploit that affected Balancer v2 pools across multiple blockchain networks. The exploit was attributed to a rounding flaw in the protocol’s swap logic, which attackers used to drain funds.
“The Nov 3 2025 v2 exploit created real and ongoing legal exposure,” Martinelli wrote. “Maintaining a corporate entity that carries the liability of past security incidents, while the protocol itself needs to move forward unburdened, is not responsible stewardship.”
Shift Away From Corporate Structure
Martinelli stated that Balancer Labs has become a liability rather than an asset, particularly as it operates without generating revenue. He emphasized that the protocol has evolved to function independently through its decentralized autonomous organization (DAO), foundation, and a network of service providers. Core contributors from Balancer Labs are expected to transition into a new entity, Balancer OpCo, pending approval through a governance vote.
Protocol Continues Despite Setback
The shutdown of Balancer Labs does not signal the end of the Balancer protocol. Martinelli clarified that the protocol remains operational and continues to generate revenue.
“I have considered whether the right answer is to shut everything down … The market signal is brutal,” he said. “But here’s what I keep coming back to: the protocol is still generating real revenue.” According to Martinelli, Balancer currently generates more than $1 million in annualized fees, indicating ongoing usage despite structural inefficiencies.
He added that the core issue was not technological failure but rather weaknesses in the economic model and the cumulative impact of security incidents on user trust.
Lean Restructuring and Tokenomics Changes
The proposed restructuring plan focuses on simplifying operations and improving sustainability. Key measures include ending BAL token emissions, winding down the veBAL governance model, and restructuring fee distribution. Under the new model, the DAO treasury would receive 100% of protocol fees, while reducing the V3 protocol share to 25%.
Additional initiatives include implementing a BAL token buyback program to provide exit liquidity for holders and narrowing development efforts to core products such as reCLAMM, liquidity bootstrapping pools, stable pools, liquid staking token (LST) pools, and weighted pools across fewer blockchain networks. Formal governance proposals outlining these changes are expected to be released by the core team.
Leadership Transition and Outlook
Following the shutdown, Martinelli confirmed he will no longer maintain a formal role within the protocol, although he expressed continued confidence in Balancer’s technology and team.
“I believe Balancer still has a chance to turn things around and prove to token holders who stay that there can be product market fit and sustainability,” he said, adding that the next 12 months will be critical. Balancer Labs CEO Marcus Hardt also addressed the situation, describing recent months as “extremely hard.”
“Balancer still has real products,” Hardt stated. “Boosted pools are generating real usage. Our fungible concentrated liquidity solution is coming back stronger after the security work. And I believe the protocol still has room to build products and revenue streams that fit Balancer uniquely well.”
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