The company behind the Balancer decentralised exchange is winding down months after a $128 million exploit, while the protocol's DAO approves a sweeping restructure that eliminates token inflation and redirects all fees to the treasury.
Balancer Labs, the corporate entity behind one of decentralised finance's foundational automated market makers, is shutting down after a $128 million exploit in November 2025 created unsustainable legal and financial exposure, while the protocol's decentralised autonomous organisation has approved a sweeping restructure that eliminates BAL token emissions, winds down the veBAL governance system and earmarks $3.6 million for a token buyback.
Co-founder Fernando Martinelli confirmed the corporate wind-down in a governance forum post in late March, writing that Balancer Labs had become a liability rather than an asset following the exploit. The attack drained funds across six blockchains in roughly 30 minutes by exploiting a vulnerability in Balancer V2's Vault contract, cutting the protocol's total value locked from approximately $450 million to $157 million and eliminating all corporate revenue streams.
The two linked governance proposals, which reached their voting deadline on 7 April, passed with overwhelming support. The first restructures protocol operations around a reduced team that will transition to a new operating entity called Balancer OpCo, narrowing the product scope to a handful of core pool types and selective non-EVM expansion. The second overhauls the protocol's tokenomics by halting all BAL emissions, discontinuing the veBAL vote-locking mechanism, routing 100 percent of protocol fees to the DAO treasury and authorising the $3.6 million buyback.
BAL emissions had become what the proposal described as a circular bribe economy that costs more than it generates. Under the outgoing model, protocols such as Aura Finance and Hidden Hand operated secondary markets for veBAL voting power, directing BAL incentives to pools that paid the highest bribes rather than those that generated the most genuine trading volume. The proposal argued that the system made governance unrepresentative of actual Balancer users and diluted the token's value without producing proportional growth in protocol activity.
The buyback will retire approximately 22.7 million BAL, roughly 35 percent of circulating supply, priced at net asset value per token. The buyback window opens approximately 12 months after the governance snapshot, timed to coincide with the expiration of existing veBAL lock periods. A separate $500,000 compensation campaign will distribute funds to veBAL holders whose locked positions lose economic rights under the new model, paid out over six months.
Under the revised fee structure, liquidity providers will retain 75 percent of swap fees, up from 50 percent under the previous model, while the remaining 25 percent flows to the DAO treasury. The previous system split fees between LPs, veBAL holders and the corporate entity. With the corporate entity gone and veBAL discontinued, the simplified structure aims to make the protocol more competitive with rivals Uniswap and Curve, both of which have adjusted their own fee models in recent months.
The exploit that precipitated the shutdown was the third-largest DeFi hack of 2025 and exposed weaknesses in Balancer's multi-chain deployment strategy. Post-mortem analyses found that the vulnerability existed in code that had passed multiple third-party audits, raising questions about the adequacy of current smart contract auditing practices. The attacker's identity remains unknown, and none of the stolen funds have been recovered.
Balancer's total value locked peaked at nearly $3.5 billion in 2021 during the height of the DeFi summer, making it one of the top five decentralised exchanges by liquidity. The 95 percent decline from that peak to its current $157 million reflects both the exploit's impact and the broader contraction in DeFi activity during the 2022-2024 bear market.
The DAO discussed an $8 million recovery plan in late 2025 that would have partially compensated exploit victims from treasury reserves, but the proposal stalled after community members argued that remaining funds should be preserved for operational continuity rather than victim restitution. The restructure approved on Tuesday effectively prioritises protocol survival over victim recovery.
Essential staff will move to Balancer OpCo, which will operate under a service-provider agreement with the DAO rather than as a controlling entity. The structure mirrors governance models adopted by other DeFi protocols that have separated their corporate and decentralised operations, including MakerDAO's transition to the Sky brand and Uniswap Labs' arm's-length relationship with the Uniswap DAO.
BAL traded at approximately $1.58 on Tuesday afternoon, down 89 percent from its all-time high of $14.80 set in April 2022. The token rose 4 percent in the hours following the vote's conclusion, as traders priced in the supply reduction implied by the emissions halt and the buyback programme.
The protocol currently processes roughly $18 million in daily trading volume across Ethereum, Polygon, Arbitrum and other supported chains.
