The Balancer decentralized finance protocol is undergoing a major restructuring. Its core development entity, Balancer Labs, has proposed winding down its current unsustainable economic model. This follows months of financial strain and a severe loss of user funds after a significant exploit in November, which contributed to a sharp decline in the protocol’s total value locked from over $3 billion to under $160 million.
Balancer Labs is moving to wind down its current financial structure. The entity has proposed a scaled-down operational model to keep the Balancer protocol running.
CEO Marcus Hardt stated that two governance proposals have been submitted to overhaul the protocol. This action follows months of crisis management after a November security exploit.
Hardt explained that while the protocol’s core technology remains functional, its economic design became unsustainable. He said the model allocated excessive incentives for liquidity relative to generated revenue, diluting BAL token holders.
The proposed changes aim to eliminate BAL emissions and redirect all protocol fees to the treasury. They also include lowering swap fees retained by the protocol and transitioning to a significantly leaner team.
The proposals include measures to address the impact on veBAL holders. This involves a buyback and compensation initiative, as restructuring would remove existing economic rights tied to token locking.
Hardt stated the goal is to provide an exit or transition path for participants. He emphasized the need for disciplined execution, saying, “We need to be more disciplined, more focused, and much clearer about what creates real value and what does not.”
The restructuring follows a prolonged decline for the protocol. Its 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 accelerated outflows, wiping out an additional $500 million in TVL within two weeks. Balancer’s total value locked has since dropped below $160 million.
