DeFi Protocol Balancer to Wind Down Operations After Failed v3 Recovery

Original | Odaily Planet Daily (@OdailyChina)

Author | Azuma (@azuma_eth)

The former DeFi leader, Balancer, is preparing to shut down operations.

On September 15, Marcus Hardt, co-founder of Balancer Labs, initiated a proposal on the protocol’s governance forum recommending an “orderly winddown” of the protocol—halting new business development, gradually transitioning liquidity pools to withdrawal-only mode, and ultimately shutting down the protocol.

This was not a sudden decision. Back in April, Balancer—still struggling to recover from last year’s hack—proposed a restructuring plan: halting BAL token emissions, directing all protocol revenue to the DAO treasury, and cutting operational costs while reducing team size. The core objective of the restructuring was clear: shrink Balancer to a size sustainable by its own revenue, then bet on v3 for a comeback.

Months later, Marcus, representing Balancer, announced that the自救 effort had failed. This once-prominent DeFi protocol, which had peaked at a TVL exceeding $2.4 billion and a token price as high as $74.45 (corresponding to a fully diluted valuation of over $7 billion), ultimately faded into obscurity.

In this open letter explaining the decision to shut down, Marcus stated that the team has largely completed the restructuring efforts previously promised.

Token emissions have been halted, the economic functions of veBAL have been discontinued, and all protocol fees now flow directly to the DAO. The operational budget has been reduced by approximately one-third, and the team size has been scaled down to 12.5 full-time equivalents. On the product side, activities have not stalled: Balancer’s Boosted Pools continue to operate, reCLAMM has been launched following a security audit and renamed AutoRange Pools, and the team continues advancing external integrations and partnerships. Marcus revealed that some partnership negotiations have progressed to advanced stages, with partners showing genuine interest in certain capabilities of v3.

But the problem is that these interests ultimately did not generate sufficient revenue.

Currently, most of Balancer’s revenue still comes from v2, and v3’s revenue growth has not reached the level needed to replace v2. Marcus bluntly stated, “The product works, but it’s not selling well.”

If we delve into the primary reason Balancer reached its current resolution, the vulnerability exploit that occurred in November last year is undoubtedly an unavoidable issue.

In November last year, Balancer suffered its most severe attack in the protocol’s history. The attacker locked Composable Stable Pools in Balancer v2, exploiting complex rounding precision errors and Vault accounting flaws in conjunction with flash loans to drain large amounts of staked tokens and stablecoins across mainnet and multiple L2 chains, resulting in a loss of $128 million.

In this open letter, Marcus stated that although the incident has passed, he still underestimated its ongoing impact on future adoption. Every subsequent partnership conversation often began with explaining what the vulnerability was, what changes were made, and why v3 differs from the past. Although many partners accepted these explanations, it inevitably led to longer decision-making cycles and reduced partnership scale.

Until this past August, Marcus could no longer see a viable financing and revenue path that would allow v3 to continue as originally planned, so Balancer chose to stop further investment.

According to the proposal details posted by Marcus on the governance forum, if the proposal is approved, Balancer will not shut down immediately, but will phase out gradually over an extended timeline.

First, on October 30, pauseable liquidity pools will be paused and switched to withdrawal-only mode; pools requiring entry into Recovery Mode due to contract mechanics will be handled accordingly; and all other adjustable pools will reduce protocol fees to zero. Additionally, Balancer’s bug bounty program will also conclude on this day.

On October 31, the existing contributor notice period ended. After this date, Balancer will cease all new business development, further reduce its team size, and retain only a small transition team to handle protocol wind-down, asset consolidation, and subsequent treasury distribution. The remaining operational budget approved under BIP-918 and covering through the end of October will no longer be used as new operating funds but will instead be allocated under the wind-down budget, with any unused portions returned to the treasury.

Starting in November, Balancer will enter the official "wind-down phase." The team will maintain only the minimum infrastructure necessary to support the exit process and will gradually revoke low-risk permissions no longer needed between November and December 2026. Meanwhile, the DAO will begin gathering assets and receivables scattered across various wallets, fee addresses, and other locations, completing consolidation prior to the first distribution. Any DAO assets—including code, licenses, and deployments—that are to be transferred require a separate Snapshot vote and will not be automatically handed over to any party as part of this shutdown.

The remaining treasury assets of the Balancer DAO are set to be returned to BAL holders. The current proposal discloses that the DAO treasury size is at least approximately $9 million; the previously approved BAL buyback plan will be canceled and replaced with an allocation mechanism that burns BAL tokens and distributes treasury assets proportionally.

The proposal states that the first redemption window is expected to open at the end of May 2027 and will last for six months. Eligible BAL holders who burn their BAL tokens will be entitled to claim a proportional share of assets from the treasury; subsequent rounds of distribution will follow to address remaining budgets during the wind-down period, assets received afterward, and unclaimed portions from the first round.

Finally, by the end of July 2028, the protocol will complete its final liquidation, at which point treasury and distribution controls will be revoked, and related entities will be gradually shut down.

Please note that this “shutdown notice” is currently only in the governance proposal stage. Balancer expects to conduct a Snapshot vote between September 25 and 29; until the voting results are finalized, the existing pools and withdrawal functions will remain unchanged. If the proposal is not approved, the current operational framework will continue.

From an industry perspective, Balancer’s story is somewhat unique. It did not announce its exit after its product had been abandoned and its community had completely disappeared. Instead, the team recently completed a significant cost-cutting initiative this year, launched new products, and attempted to rebuild revenue streams with v3.

But when these measures still fail to generate sufficient revenue, maintaining the protocol itself becomes a cost. Marcus’s logic in the open letter is straightforward—if there is no viable path to financing or growth that can change the current situation, then continuing to deplete the treasury merely delays the same outcome. Rather than further investing remaining assets into a proven ineffective path, it is better to stop now and return the remaining value to token holders.

This may also be the more noteworthy aspect of Balancer's recent shutdown.

Early DeFi projects often relied on token incentives, liquidity mining, and continuously growing TVL for growth, but as the industry matures, protocols ultimately must answer a traditional business model question: can the product generate sufficient real revenue sustainably?

Balancer once attempted to actively rescue itself, but now it has chosen to offer another answer— if the long-term outlook is negative, an orderly exit can also be a governance option for the DAO.