Balancer Labs to close after $110M v2 exploit turns corporate arm into a liability
Balancer co-founder Fernando Martinelli announced Tuesday that Balancer Labs—the corporate entity that incubated and funded the Balancer protocol—will be shut down. The move follows a November 2025 v2 exploit that drained roughly $110 million in assets (including osETH, WETH and wstETH), a breach CoinDesk first reported. It was the third known security incident for the project and, Martinelli said, created legal exposure that made BLabs “a liability rather than an asset.”
Why BLabs is being wound down
- Martinelli said he “seriously considered” winding everything down, but stopped short because the protocol itself still produces revenue. BLabs, however, requires resources and carries legal risk the team no longer wants on the balance sheet.
- The team says BLabs is not sustainable in its current form “without any sources of revenue.”
Where Balancer stands today
- Once a pillar of the DeFi boom, Balancer’s TVL peaked near $3.5 billion in late 2021, placing it alongside protocols like Aave, Uniswap and Curve.
- DeFiLlama shows TVL at $2.96 billion in October 2021 with fees spiking above $6 million annualized. Today TVL is about $157 million—a roughly 95% decline from the peak.
- The protocol’s market cap has tumbled to around $10 million. At one point BAL traded as low as $0.16 (implying a fully diluted valuation near $11 million); on Tuesday morning BAL was trading around $0.72, about 88% below its all-time high.
Revenue and runway
- Balancer generated just over $1 million in annualized fees over the past three months—insufficient to sustain the previous operating structure but enough to support a much leaner team.
The proposed restructuring
Martinelli and the remaining team are proposing an aggressive, leaner plan to stabilize the protocol and remove toxic incentives:
- End BAL emissions entirely to stop what Martinelli called a “circular bribe economy that costs more than it generates.”
- Wind down the veBAL model, which the team says was captured by meta-governance protocols (like Aura) and bribe markets that made voting “unrepresentative of the actual Balancer front line.”
- Redirect protocol fees so the DAO treasury captures 100% of revenue instead of the current 17.5%.
- Reduce the v3 protocol share to 25% to encourage organic liquidity provisioning.
- Implement a BAL buyback to provide holders with an exit option at a “fair price.”
- Absorb essential BLabs staff into a reconstituted Balancer OpCo, pending a governance vote. Martinelli said he will have no formal role after the wind-down but offered to serve as an advisor.
- Narrow product focus to five prioritized areas: reCLAMM pools, liquidity bootstrapping pools, stablecoin and liquid-staking-token pools, weighted pools, and expansion to non-EVM chains. Other product efforts would be cut.
What this means for holders and the protocol
Martinelli framed the plan bluntly: “If you believe in the restructured Balancer, you stay. If you don't, you get a fair exit.” The aim is to clear the overhang created by BLabs and the emissions-driven incentive model, while keeping the protocol alive in a smaller, cleaner form.
Next steps
The changes and staff moves are subject to governance votes. If approved, Balancer would shift to a more centralized revenue capture model and a much narrower product roadmap—trading the old growth-by-incentive playbook for a leaner, fee-driven approach.
The shutdown of Balancer Labs marks the end of an era for one of DeFi’s early infrastructure builders and shows how security breaches and governance capture can reshape the strategic options for protocol teams and DAOs.
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