Balancer Labs Announces Dissolution Following Hack, DeFi Protocol Reorganized Under DAO Management

DeFi Protocol Balancer’s developer company, Balancer Labs, announced its closure last November, about four months after suffering a $116 million vulnerability attack. The protocol itself will continue to operate, with governance and operational functions transferred to the Balancer Foundation and DAO in the future. DAO members have been asked to vote on two restructuring proposals.

Dual Reasons for Balancer Labs Closure: Financial Imbalance and Legal Risks

Balancer Labs CEO Marcus Hardt pointed out that the company has long spent excessively on liquidity incentives, resulting in a severe imbalance between costs and actual protocol revenue. The cost structure’s price is the ongoing dilution of BAL token holders’ interests.

Martinelli added that the November exploit “created real and ongoing legal risks.” Maintaining a corporate entity after the incident to bear unresolved security liabilities is no longer financially feasible. Notably, he also mentioned that Balancer has generated over $1 million in actual revenue in the past three months, indicating that the core functionality of the protocol still has a sustainable foundation. “The issue isn’t that Balancer can’t be used, but that its economic model is flawed. These issues are solvable,” he said.

Four-Year Collapse of Balancer TVL: From $3.3 Billion to $158 Million

• November 2021: TVL peaks at $3.3 billion, making Balancer one of the most representative DeFi protocols during the bull market.
• October 2025: TVL drops to $800 million, with long-term liquidity continuing to flow out.
• Two weeks after the November 2025 hacker incident: TVL further shrinks by about $500 million, with the security breach causing immediate damage to user confidence.
• Current: TVL has fallen to approximately $158 million, a decline of over 95% from the peak.

This trajectory clearly illustrates the systemic difficulties DeFi protocols face in recovering liquidity after large-scale hacking incidents, providing the core background for Balancer Labs’ ultimate decision to close rather than continue draining resources.

DAO Takeover Plan: Streamlined Continuation and Tokenomics Restructuring

Martinelli proposed a “more streamlined continuation path,” including reducing BAL token issuance to zero, restructuring fee models to increase protocol revenue for the DAO, minimizing team size, and significantly cutting operational costs.

Hardt stated, “Balancer still has enormous growth potential. If we can successfully complete the transition, we have the opportunity to build a stronger, more sustainable protocol.” Currently, DAO members have been asked to vote on two proposals, one involving restructuring Balancer’s operational framework and the other regarding potential adjustments to the BAL token economic model.

Frequently Asked Questions

Q: Does the closure of Balancer Labs mean the protocol will also cease operation?
A: No. Balancer Labs’ closure pertains to the corporate entity, not the protocol itself. Martinelli and Hardt plan to transfer governance and operational functions to the Balancer Foundation and DAO, allowing the protocol to continue operating under a leaner structure.

Q: What are the subsequent impacts of the $116 million vulnerability attack in November on Balancer?
A: Besides the direct loss of $116 million, the attack triggered real and ongoing legal risks, and within two weeks, TVL decreased by about $500 million. This chain reaction caused Balancer’s TVL to fall from a peak of $3.3 billion to the current approximately $158 million, a reduction of over 95%.

Q: How will the restructuring affect BAL token holders?
A: The proposals include reducing BAL token issuance to zero and restructuring fee models to increase DAO revenue. This means that liquidity incentives that previously diluted holder interests will be significantly reduced. However, the specific plan will only be implemented after DAO approval through voting.