Balancer Proposes Major Overhaul of Token Economics and Operational Restructuring

Original author: KarenZ, Foresight News

On November 3, 2025, a security incident costing over $120 million largely shattered the growth illusion of the established DeFi protocol Balancer.

This is the largest security incident in Balancer's history. But the deeper wound lies beyond that astronomical figure.

Reviewing the financial data attached to Balancer’s latest proposal, its fundamentals are already far from optimistic: the protocol’s annualized fees amount to approximately $1.65 million, while the DAO’s estimated annualized income is only $290,000, representing 17.5%.

The remaining funds flowed to various parties, including veBAL holders, core pools, and the Balancer Alliance program. The entire system appears to be a continuously operating "money printer," but in reality, it is leaking on two fronts: first, fees are fragmented and lost at multiple layers; second, the BAL token experiences an annual inflationary release of approximately 3.78 million tokens, creating a sustained selling pressure of about $580,000 at current prices—considering that BAL’s current fully diluted valuation (FDV) is only $11 million.

The annual operating budget reaches $2.87 million, while the annualized revenue is only $290,000, resulting in a shortfall of $2.58 million.

The DAO treasury (excluding BAL) has only $10.3 million left. At this rate, the treasury will last less than four years.

Following the security incident, Balancer’s TVL suffered further losses. Balancer’s TVL dropped from $800 million to approximately $300 million, and has continued to decline, now standing at less than $160 million. For context, at its peak in 2021, Balancer’s TVL exceeded $3 billion.

Source: DefiLlama

Balancer stands at a pivotal crossroads. On March 23, 2026, the Balancer core team simultaneously released two critical governance proposals: a comprehensive overhaul of the BAL tokenomics and a restructuring of the operational framework.

The core logic of both documents can be summarized in one sentence: move away from token release-driven growth models toward revenue-driven sustainable operations.

Propose that Balancer Labs be formally dissolved, with its core technical team joining Balancer OpCo Limited as contractors, which will continue to operate as the legal representative entity of the DAO.

The team size was reduced from approximately 25 people to 12.5 full-time equivalents (including exclusive service providers such as Beets and MAXYZ), and the annual operating budget was lowered from $2.87 million to $1.9 million, a 34% reduction.

The product lineup has also been significantly streamlined. The team will focus resources on three products with proven commercial viability: Boosted Pools (the flagship product), reCLAMM (to be relaunched after vulnerability fixes and possibly renamed), and LBP (Token Launch Pool, operated opportunistically).

Other exploratory initiatives, such as ETF structured products, yield optimizers, and AI-driven liquidity tools, can only proceed upon achieving core KPIs.

On-chain deployment has also been scaled back. Maintaining V2 and V3 across more than nine chains is no longer sustainable; the team has clearly retained only four core chains—Ethereum, Gnosis, Arbitrum, and Base. Deployments on all other chains will be reviewed individually based on fee income and operational costs, and those that fail to meet criteria will be terminated outright.

Stop BAL emissions and eliminate veBAL

After the proposal passes, Balancer will terminate the BAL token incentive emissions without any transition period.

At the same time, the veBAL governance mechanism will be officially discontinued. Holders will cease to receive any economic rewards after the final biweekly fee distribution, and their locked veBAL will become purely governance tokens, awaiting expiration upon the end of the lock-up period.

This is a difficult decision, but the logic behind it is clear: the veBAL mechanism has had structural vulnerabilities to oligarchic control since its inception. Currently, Aura Finance (the veBAL meta-governance protocol) and large whale holders have accumulated significant voting power, causing genuine community voices to become increasingly marginalized in governance. Rather than fostering healthy protocol development, this mechanism has become a vehicle for a circular economy game—protocol funds flow through incentives to intermediaries, who then direct even more incentives back toward themselves.

If veBAL was once an experiment by Balancer inspired by Curve’s design, the team now admits: the experiment is over, and the results fell short of expectations.

In response to the termination of veBAL economic rights, Balancer will provide a $500,000 compensation program, directly distributing cash payments to veBAL holders.

All fees go to the DAO treasury, reducing the V3 protocol's cut.

All protocol fees—including V2 swap fees, V3 swap fees, yield fees, and LBP fees—will now flow 100% into the DAO treasury, replacing the previous multi-party fee distribution mechanism.

Meanwhile, the protocol fee cut for V3 has been reduced from 50% to 25%. This means that for the same transaction, liquidity providers now receive 75% of the fees, up from 50%.

These two actions appear opposite in direction, but share the same underlying logic: the first eliminates circular economy practices to provide the treasury with real, usable funds; the second enhances LP attractiveness by accepting lower platform fees in exchange for greater organic liquidity and genuine trading volume.

The proposal estimates that, after the reforms, the DAO's annualized revenue could reach approximately $1.22 million, more than four times the current $290,000.

Those who wish to exit can burn BAL at a price of $0.16 per unit to exchange for stablecoins.

The treasury will also allocate 35% of its assets (currently approximately $3.6 million) to a dedicated pool, not to actively purchase BAL on the secondary market, but to open a "Burn for Stablecoin" channel: BAL holders can voluntarily send their tokens to the contract to be burned and receive an equivalent amount of stablecoins at the NAV price (net asset value, approximately $0.16 per token).

The window will open 12 months after the proposal passes and remain open for 12 weeks; any unused stablecoins will be returned to the treasury after the window closes. The 12-month waiting period is designed to allow holders whose veBAL is gradually unlocking to participate.

As of the time of writing, the BAL price is $0.1548, below the NAV price. Offering an exit at the NAV price provides those wishing to leave with a more dignified option than a fire sale on the secondary market.

If this channel is fully utilized, approximately 22.7 million BAL tokens will be burned, accounting for about 35% of the circulating supply and six times the current annual inflationary emission.

If both proposals are approved, the team’s financial model projects:

The DAO's annual revenue is approximately $1.22 million (assuming TVL rebounds after the V3 fee reduction), with annual operating expenses of $1.9 million, repurchase expenditures of approximately $3.6 million, and an additional $500,000 in veBAL compensation.

After completing the buyback and compensation, the treasury still has approximately $6.2 million remaining, reducing the annual funding gap from about $2.6 million to $700,000, bringing the theoretical lifespan to nearly 9 years.

For a DeFi protocol, nine years is enough to span an entire industry cycle.

However, this model is based on optimistic assumptions: that the reduced fee cut in the V3 protocol will indeed drive more organic TVL; that the smaller team can truly support daily operations, security maintenance, and other functions of the protocol; and that the core products (especially reCLAMM) can successfully re-attract the market after repairs.

If any component falls below expectations, the nine-year lifespan will be rapidly shortened. The team has also explicitly stated that if the DAO’s monthly revenue remains below $60,000 for three consecutive months, a revised proposal must be submitted to the community.

For Balancer, this is a near-desperate reform: abandoning its once-prized veBAL mechanism and the complex multi-party revenue-sharing structure, returning to a radically simplified origin—letting real transaction fees drive the protocol’s sustainability, rather than relying on newly minted tokens to sustain artificial growth.

Whether this bold reform will ultimately succeed must be left to the market and time—let us wait and observe its long-term outcomes.