Balancer Labs, the entity behind the DeFi protocol Balancer, is moving to wind down its current structure after months of financial strain. Its leadership has proposed a scaled-down model to keep the Balancer protocol operational.
CEO Marcus Hardt said two governance proposals have been submitted to overhaul the protocol’s structure, following months of crisis management after the November exploit.
Economic Model Breakdown
In a recent post on X, he explained that while Balancer’s core technology, including its v3 upgrade and boosted pools, remains functional, the economic design around the protocol had become unsustainable.
According to Hardt, Balancer was allocating excessive incentives to attract liquidity relative to the revenue generated, which led to dilution of BAL token holders. The proposed changes aim to address this by eliminating BAL emissions, redirecting all protocol fees to the treasury, lowering swap fees retained by the protocol to benefit liquidity providers, and transitioning to a significantly leaner team.
The proposals also include measures to address the impact on veBAL holders, including a buyback and compensation initiative, as the restructuring would remove existing economic rights tied to token locking. The exec added that the goal is to provide participants with an exit or transition path rather than enforce participation under revised terms. While highlighting that the transition would require stricter execution going forward, Hardt also said,
“That does not mean everything is solved or that we should start making promises we have not earned the right to make. We need to execute well on the core first. We need to be more disciplined, more focused, and much clearer about what creates real value and what does not.”
Exploit and TVL Crash
The restructuring comes after a long period of decline for Balancer. Once a major DeFi platform during the 2020-2021 cycle, the protocol’s total value locked peaked above $3 billion in November 2021 before falling to $800 million by October 2025, according to data compiled by DeFiLlama.
The November hack further accelerated outflows as it wiped out an additional $500 million in TVL within two weeks. Balancer’s TVL has since dropped below $160 million.
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