Balancer Labs shuts down after $110M exploit rocks DeFi market

Balancer Labs, the corporate entity behind the decentralised exchange protocol Balancer, is shutting down as financial strain and legal risks reshape its future.

Co-founder Fernando Martinelli confirmed the decision in a governance forum post on Tuesday, stating that the company is no longer sustainable.

The move follows security incidents, including a major exploit in November 2025 that drained about $110 million in digital assets.

The entity that incubated and funded the protocol will be wound down under a broader restructuring plan.

Exploit impact and legal exposure

The November 2025 exploit marked the third known breach linked to Balancer and involved assets such as osETH, WETH, and wstETH.

Martinelli cited the incident as a key reason for closing Balancer Labs, noting that the corporate structure had become a liability.

The breach introduced legal exposure that made it difficult to sustain the organisation without a stable source of income.

Martinelli said he had considered shutting down the entire ecosystem but decided against it because the protocol continues to generate fees.

Declining metrics reshape strategy

Balancer was once among the most prominent names in decentralised finance. At its peak in late 2021, total value locked approached $3.5 billion, placing it alongside Aave, Uniswap, and Curve.

TVL reached $2.96 billion in October 2021, with annualised fees exceeding $6 million.

That position has changed sharply. TVL now stands at $157 million, representing a drop of about 95% from peak levels.

The protocol’s token has also lost ground. BAL trades at $0.16, with a market capitalisation of around $10 million and a fully diluted valuation of $11 million.

Revenue persists but not enough

Despite the decline, the protocol continues to generate income. Over the past three months, Balancer has produced more than $1 million in annualised fees.

However, this level of revenue is not sufficient to support the current operating structure. The restructuring plan focuses on aligning costs with revenue by reducing overhead.

Governance overhaul and cost cuts

The proposed changes include ending BAL emissions entirely, removing what Martinelli described as a circular incentive system.

The veBAL governance model will also be wound down. Martinelli pointed to the influence of meta-governance protocols such as Aura and bribe markets, which he said made voting unrepresentative of contributors.

Protocol fee distribution will shift. The DAO treasury is set to capture 100% of revenue, compared with the current 17.5%. The v3 protocol share will drop to 25% in an effort to attract liquidity.

A buyback programme is also planned to provide exit liquidity for token holders who do not support the new structure.

Leaner structure and narrowed scope

Under the restructuring, essential team members from Balancer Labs will move into Balancer OpCo, subject to a governance vote.

Martinelli will step away from any formal role after the wind-down but may remain involved as an advisor.

The product strategy is being streamlined to focus on reCLAMM pools, liquidity bootstrapping pools, stablecoin and liquid staking token pools, weighted pools, and expansion to non-EVM chains.