Under pressure from declining total value locked and the aftermath of a major security breach, Balancer Labs is preparing to wind down its current structure and transition to a leaner operational model. The goal is to stabilize the Balancer protocol and ensure its continued functionality.
Chief executive Marcus Hardt confirmed that two governance proposals have been submitted to overhaul the protocol’s structure. These changes follow months of crisis management after the exploit that occurred in November.
Breakdown of the Economic Model
In a recent post on X, Hardt explained that while Balancer’s core technology remains intact, including its version three upgrade and boosted liquidity pools, the economic framework supporting the protocol has become unsustainable.
He noted that Balancer had been offering excessive incentives to attract liquidity compared to the revenue it generated. This imbalance led to dilution for holders of the BAL token.
The proposed restructuring focuses on correcting these issues. Plans include ending BAL token emissions, redirecting all protocol fees to the treasury, and reducing the share of swap fees kept by the protocol in order to better reward liquidity providers. The organization also intends to operate with a much smaller and more efficient team.
Additional measures aim to address the impact on veBAL holders. These include a buyback and compensation program, as the restructuring would remove certain economic rights tied to token locking. According to Hardt, the intention is to give participants a clear option to exit or transition rather than forcing them to remain under new conditions.
He emphasized that while the restructuring is necessary, it does not guarantee immediate recovery. The focus going forward will be on disciplined execution, prioritizing core functions, and clearly identifying what generates real value within the protocol.
Impact of Exploit and Declining Total Value Locked
The restructuring follows a prolonged downturn for Balancer. Once a leading decentralized finance platform during the 2020 to 2021 cycle, the protocol saw its total value locked rise above 3 billion dollars in November 2021. However, this figure dropped significantly to around 800 million dollars by October 2025, based on data from DeFiLlama.
The November exploit accelerated this decline, wiping out an additional 500 million dollars in total value locked within just two weeks. Since then, Balancer’s total value locked has fallen further to below 160 million dollars, highlighting the scale of the challenges facing the protocol.#crypto#cryptonews https://coinsignals.net https://t.me/coinsignalpublic
