DeFi stalwart Balancer mulls shutdown after $130M hack

Once a household name in the DeFi sector, decentralized exchange Balancer is considering calling it quits.

In a proposal posted to the project’s governance forum, Balancer Labs CEO Marcus Hardt suggests a “phased sunset of the protocol.”

The post explains that none of the efforts to return to profitability, employed in response to last year’s hack, “converted into sustained revenue growth.”

Under Hardt’s proposal, Balancer’s $9 million treasury would be distributed to BAL holders, pro-rata.

Read more: Balancer exploit drains $129M in DeFi disaster

The problem

Launched just in time for 2020’s “DeFi summer,” Balancer innovated on the existing two-asset automated market maker model used by Uniswap and Bancor to introduce multi-asset pools and custom pool weighting.

It was a successful project in itself and was widely ‘forked,’ its popular v2 code has been used in 27 protocols across multiple blockchains, according to DeFiLlama data. Balancer’s total value-locked (TVL) peaked in November 2021 at over $3 billion, and now stands at just $58 million.

Then on its third iteration, Balancer’s v3 protocol was hit by a devastating exploit in November last year, with losses totalling almost $130 million and causing a ripple effect across the sector.

Both before and since, the project experienced a handful of smaller security incidents. The latest came just last month, when its original v1 codebase was exploited for over $200,000.

Read more: Osmosis took 74 days to discover 40-BTC Nomic exploit

Previously, in September 2023, Balancer lost approximately $1.2 million from “Boosted Pools” across its Ethereum and Optimism deployments. DeFiLlama’s database includes incidents from 2023 and 2020, totalling a further $1.3 million in losses. 

The proposal

Hardt proposes an “orderly wind down,” which would include stripping back the DAO as much as possible and distributing treasury funds to BAL holders.

The wind down would see all pools moved to withdrawal-only mode on October 30, and the fate of DAO-owned assets beyond the treasury would be subject to a further vote.

The proposal brings forward a pending review of the recovery plan’s success, as Hardt feels that “waiting for the calendar would change the numbers, not the conclusion, and every month of waiting is spent from the treasury.”

He further detailed his reasoning in a post on X. The cost-reduction side of the recovery plan was a success, he claims, but protocol revenue failed to grow.

He “underestimated how much the exploit would continue to limit adoption,” which led to smaller sums deployed and hesitation from counterparties.

He also paid tribute to the Balancer team who kept v3 “safe,” “usable” and “alive,” during the “hardest year the protocol has had,” all as “smaller team and with less money.”

Shutdown season

Balancer’s decision comes as many other well-known DeFi projects opt to close down, or take a substantial pivot.

Last week, Harmony announced it would shut down its blockchain in response to “threats posed by state actors and AI agents.” It will move operations to Ethereum and plans a pivot to become “the remix economy for AI video.”

Popular DEX aggregator Odos Protocol shut down in July and beleaguered “real-world asset” lending platform Goldfinch threw in the towel the month prior.

Outside of DeFi, centralized exchange AscendEx announced its cessation of operations in early July, amidst concerns over liquidity to process pending user withdrawals.

Just hours ago, CoinEx gave its users a three-month deadline to withdraw assets, warning it would charge a 5% monthly custody fee from December 22.

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