Balancer Labs shuts down after hack and liquidity decline

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Balancer Labs shuts down

Highlights

Balancer Labs is shutting down after liquidity decline and a major hack.
The protocol will continue, shifting governance to the DAO and foundation.
The closure highlights a transition to more sustainable, revenue-based DeFi structures.

The protocol itself will continue operating. The move reflects a shift in approach, with governance transitioning to the DAO and the foundation, while the operating structure becomes leaner and more cost-efficient.

Closure of Balancer labs and key reasons

Co-founder Fernando Martinelli acknowledged that the existing structure had run its course: “After careful consideration, I have decided to wind down Balancer Labs. This is not a decision I take lightly — BLabs has been the original home of this protocol, the entity that incubated the idea, funded early development, and brought Balancer to life.” He added that the company had become “a liability rather than an asset to the protocol’s future,” as it lacked a sustainable revenue stream.

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The situation was worsened by a November hack that led to the loss of tens of millions of dollars. Martinelli noted that the incident “created a real and ongoing legal threat,” making it difficult to maintain a traditional corporate structure.

CEO Markus Hardt pointed to another issue — the protocol’s inefficient economics. According to him, the cost of attracting liquidity exceeded actual revenues, making the model unsustainable. He stressed that the platform itself remains functional, but its financial structure needs to be reworked.

The numbers reflect this trend. After reaching a peak TVL of $3.3 billion in 2021, the figure has dropped to around $158 million, while the BAL token’s market capitalization has fallen nearly 99% from its all-time high.

Restructuring and new governance model

With Balancer Labs shutting down, key functions will shift to a new entity, OpCo, as well as to the DAO and the foundation. Part of the team will continue working within this structure, while operational costs are expected to be significantly reduced.

At the same time, a major overhaul of tokenomics is under discussion. Proposals include ending BAL emissions, removing liquidity incentives, and directing 100% of protocol fees to the DAO treasury. A token buyback mechanism for exiting investors is also being considered.

Despite the challenges, the protocol remains operational. Martinelli noted that it generated over $1 million in revenue over the past three months, indicating underlying value if the economic model is adjusted.

Rethinking DeFi models and market impact

The case of Balancer highlights broader shifts in DeFi. Growth models based on token emissions and liquidity incentives are losing effectiveness, especially amid declining user activity.

A more pragmatic approach is emerging — one focused on real revenue rather than subsidies. Similar transitions are already underway in projects like Curve and MakerDAO, where fee-based sustainability is gaining importance.

For investors, this marks a shift in the market cycle. Even well-established protocols remain vulnerable to a combination of factors, from hacks to flawed tokenomics. Recovery now depends not only on technical improvements but also on financial restructuring.

Whether Balancer can regain liquidity and rebuild user trust in its updated model will determine its future. The protocol still has potential, but the focus has shifted from rapid growth to resilience and sustainability.

Balancer has faced security issues before. In 2023, the protocol suffered a scam attack that resulted in losses of around $900,000 — an early warning sign of the systemic risks that continue to affect even major DeFi projects.

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