A significant turning point is occurring in Balancer, one of the prominent projects in the decentralized finance (DeFi) ecosystem. Balancer Labs, the corporate structure behind the protocol, has decided to cease operations due to security issues and financial pressures. However, this development does not mean that the Balancer protocol will completely shut down; on the contrary, the team aims to continue with a "leaner" model. The main reason behind the decision is the attack that occurred on November 3, 2025, which resulted in a loss of approximately $128 million. This exploit, affecting Balancer v2 pools, is said to have stemmed from a rounding error in the swap mechanism and was exploited by attackers. Fernando Martinelli, the protocol's co-founder, emphasizes that this event created not only technical but also serious legal liabilities. According to Martinelli, Balancer Labs has become more of a burden than an advantage for the protocol. A company structure that does not generate revenue continuing to bear the responsibility for past security vulnerabilities does not offer a sustainable model. Therefore, the team wants to end the corporate structure and transform the protocol into a more flexible structure that operates through DAOs, foundations, and service providers.
The protocol is not closing, it's restructuring
Although Balancer Labs is closing, the protocol's operations will continue. Martinelli states that they seriously considered the option of completely shutting down, but the current revenue generation led them to abandon this decision. Balancer's recent annual transaction fee generation of over $1 million is considered sufficient for a smaller and more efficient structure.
However, looking at the project's past performance, a significant decline is noticeable. Balancer, which reached approximately $3.5 billion in total value locked (TVL) in 2021, has fallen to approximately $157 million today. This represents a drop of nearly 95%. Similarly, the market value and price of the BAL token have also weakened significantly.
Martinelli states that the root cause of what happened is not a technological failure, but the unsustainability of the economic model. In particular, the loss of trust caused by security vulnerabilities and the costly token incentive structure negatively affected the protocol's growth.
New Model: Lower Costs, Clearer Focus
The restructuring plan involves quite radical steps. Accordingly, BAL token distributions will be completely stopped and the current incentive system will end. In addition, the veBAL governance model is planned to be phased out. This model is thought to weaken real user representation, especially by being affected by external protocols and incentive mechanisms.
In the new structure, 100% of protocol revenues will be transferred directly to the DAO treasury. This rate was considerably lower in the current system. In addition, the aim is to attract more organic liquidity by reducing the v3 protocol share to 25%.
The team also plans to launch a buyback program to offer BAL token holders the opportunity to exit. In this way, it is aimed to fairly exit the system for investors who do not trust the new model.
On the technical side, the focus is narrowed. Development work will concentrate on specific areas such as reCLAMM pools, liquidity launch pools, stablecoin and liquid staking token (LST) pools, and weighted pools. Operational efficiency will be increased by operating in fewer chains. A portion of the Balancer Labs team is expected to move to the newly formed Balancer OpCo structure, subject to governance voting. Martinelli, while stepping down from his official duties, states that he may continue to support the project externally.
