Balancer co-founder Fernando Martinelli said Balancer Labs will shut down as the protocol pivots toward a leaner, DAO-led structure following months of financial strain and fallout from a 2025 exploit.
The End of Balancer Labs
Balancer Labs, the original development entity behind the decentralized exchange ( DEX) protocol, is being wound down after what Martinelli described as a six-month stretch marked by legal risk, reputational damage, and unsustainable economics.
Martinelli stated the decision reflects a shift in how the protocol now operates, with the decentralized autonomous organization ( DAO), foundation, and service providers taking precedence over a centralized corporate structure.
He pointed to the Nov. 3, 2025, Balancer v2 exploit as a key factor, noting it created ongoing legal exposure tied to the company. Maintaining a corporate entity under those conditions, he explained, is no longer viable. Despite the shutdown, the protocol itself is not closing.
Martinelli said he considered a full wind-down but ultimately rejected it, citing continued revenue generation and ongoing development efforts. Balancer generated more than $1 million in annualized fees over the last three months, according to Martinelli, suggesting the core system remains functional even as its economic design falters.
He argued the issue lies not in the protocol’s technology, but in its tokenomics and cost structure—both of which he described as fixable under a streamlined model. The proposed path forward includes eliminating BAL token emissions, restructuring fee distribution, and reducing operational overhead to align expenses with revenue.
Martinelli also backed plans to wind down the veBAL governance model, which he said became dominated by external incentives and “bribe” dynamics that no longer reflect core contributors. Under the new structure, 100% of protocol fees would flow to the DAO treasury, while the protocol’s share would be adjusted to attract organic liquidity and improve sustainability.
A proposed BAL buyback would offer holders a way to exit at a set price, while allowing remaining participants to support the restructured system without lingering sell pressure. Operationally, the protocol will narrow its focus to key products such as reCLAMM, liquidity bootstrapping pools (LBPs), stable and liquid staking token pools, and weighted pools.
Martinelli said he will step away from any formal role once Balancer Labs is dissolved, though he plans to remain involved informally as an adviser and supporter. He framed the move as a reset rather than an ending, arguing that decentralized finance (DeFi) projects can recover if they cut excess, fix incentives, and execute with discipline.
FAQ 🔎
- Why is Balancer Labs shutting down?
Legal exposure from the 2025 exploit and a lack of sustainable revenue made the entity no longer viable. - Is the Balancer protocol shutting down too?
No, the protocol will continue under DAO governance with a leaner operational model. - What changes are planned for BAL tokenomics?
Proposals include ending emissions, restructuring fees, and offering a buyback for holders. - What is the goal of the restructuring?
The aim is to align costs with revenue and create a self-sustaining decentralized exchange model.