Balancer DAO Proposes Orderly Shutdown After Exploit and Revenue Decline

Balancer, once one of DeFi’s largest decentralized exchanges with over $3 billion locked at its 2021 peak, has submitted a Sep 14 governance proposal to wind down the protocol. Token holders will vote on the plan from Sep 25 to Sep 29.

Background and recent setbacks

In November 2025 the protocol suffered a $128 million exploit that drained funds from Balancer v2 pools on multiple blockchains. The attack triggered a steep decline in total value locked, which fell to roughly $58 million. A prior cost‑cutting effort reduced the team from about 25 staff to 12.5 full‑time equivalents and cut the operating budget by a third, but revenue never recovered.

Failed turnaround with Balancer v3

The DAO had bet on Balancer v3 – including Boosted Pools and AutoRange Pools (formerly reCLAMM) – to replace shrinking v2 income. Despite security work and integration talks, v3 growth lagged, and prospective partners remained hesitant because of the November hack. The DAO concluded there was no funded path to sustain further v3 development.

Proposed wind‑down steps

• Cease all new business development.
• Begin orderly shutdown of operations.
• Pause or withdraw liquidity from pools starting Oct 30, with a “withdrawals‑only” mode for pausable pools and zero protocol fees for non‑pausable pools.
• Reserve funds recovered from the exploit for affected liquidity providers, not for treasury distribution.
• Conduct a six‑month BAL redemption round ending May 2027, allowing holders to burn BAL for a pro‑rata share of the treasury (estimated minimum $9 million).
• Offer a second distribution to participants of the first round; holders who skip the first window forfeit the follow‑on share.

Community reaction

Aave founder Stani Kulechov called the closure “a loss for the sector,” praising Balancer’s pioneering role. The DAO has not yet released a pool‑by‑pool treatment list, leaving liquidity providers uncertain about which pools will be paused or remain active.

Next steps for stakeholders

If the vote passes, developers may fork the open‑source code, and partners will need to decide whether to migrate liquidity, continue using Balancer’s technology, or abandon related products.