On the Future of Balancer: Shutting Down Balancer Labs, Supporting the Path Forward

Service Providers
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Author: Fernando Martinelli | Co-Founder, Balancer Protocol

Hi everyone,

I’m writing this because I believe you all deserve full transparency from me on where I stand, what I’ve decided regarding Balancer Labs, and why I still believe in the people building this protocol.

The last 6 months have been the hardest period since we launched Balancer. The November exploit, the reputational damage, the token trading below NAV — none of this is lost on me. I’ve spent months thinking about what the honest path forward looks like, not just for me and BLabs, but for every BAL holder, every LP, and every contributor who has given their energy to this project.

Balancer Labs Is Shutting Down

After careful consideration, I have decided to wind down Balancer Labs. This is not a decision I take lightly — BLabs has been the original home of this protocol, the entity that incubated the idea, funded early development, and brought Balancer to life. But the reality is that BLabs, as a corporate entity, has become a liability rather than an asset to the protocol’s future and is just not sustainable as is without any sources of revenue.

The reasons are straightforward. The Nov 3 2025 v2 exploit created real and ongoing legal exposure. Maintaining a corporate entity that carries the liability of past security incidents, while the protocol itself needs to move forward unburdened, is not responsible stewardship. The Balancer protocol has evolved well beyond the point where it needs a traditional company sitting above it. The DAO, the Foundation, and the service provider model are how this protocol operates today, and that’s the right structure for what comes next.

The essential BLabs team members are to be absorbed into Balancer OpCo (pending governance vote). Marcus and Danko will be presenting the BIP for operations proposal, and I’m fully supportive of that process.

Why I’m Not Calling for a Full Wind-Down

I want to be honest: I have considered whether the right answer is to shut everything down. I’ve thought about it seriously. The market signal is brutal.

But here’s what I keep coming back to: the protocol is still generating real revenue. Over the last three months, Balancer generated over one million USD in total fees annualized. That’s not nothing — that’s a functioning protocol buried under a broken tokenomics model and an overweight cost structure. The problem isn’t that Balancer doesn’t work. The problem is that the economics around Balancer aren’t working. Those are fixable.

I’ve watched the team work through the response to the exploit, the reCLAMM development, the v3 migration. The people who are still here — Danielmk, Danko, Xeonus, Fábio, Marcus, and many others — are here because they believe in this. They’re not coasting. They’ve been in the trenches through the worst period this protocol has ever seen, and they came back with a plan that I think is credible.

The lean continuation path — cutting BAL emissions to zero, restructuring fees so the DAO actually captures revenue, reducing the team as much as possible, targeting much lower operating costs — is not a fantasy. That’s a real shot at a turn around, and the team has earned the chance to take it.

What I Support

I am fully supportive of the tokenomics restructure being proposed and the companion BIP for operations. Specifically:

Ending the emissions bleed. BAL emissions have been diluting holders and funding a circular bribe economy that costs more than it generates. Cutting emissions to zero is the single most important thing we can do for the token and the treasury.

Winding down veBAL. The ve model served its purpose, but it became a vehicle for meta-governance capture. Aura, Humpy, and the bribe markets turned veBAL governance into something unrepresentative of the actual Balancer front line. Moving to a leaner governance model will allow the team to focus on the essential.

Restructuring fees for sustainability. Routing 100% of protocol fees to the DAO treasury, reducing the V3 protocol share to 25% to attract organic liquidity — this is how you build a self-sustaining protocol. The current split, where the DAO captures only 17.5% of what the protocol generates, is not sustainable anymore.

The BAL buyback. Offering BAL holders exit liquidity at a fair price is the right thing to do. If you believe in the restructured Balancer, you stay. If you don’t, you get a fair exit. That’s honest dealing, and it clears the overhang.

The focused product scope. Concentrating on reCLAMM, LBPs, stables/LST pools, weighted pools, and less EVM chains is exactly the kind of discipline a lean team needs. No more spreading resources across low-value deployments.

My Role Going Forward

I haven’t been part of the day-to-day operations for some time already, and after BLabs winds down I will cease to have any formal relationship with the protocol. But I remain a believer in the underlying technology and the team that’s staying. I’m happy to help as an advisor, a sounding board, and a supporter of whatever comes next.

I’ve seen what happens when DeFi projects that have lost momentum make a clean break and come back stronger. It’s possible. But it requires the courage to cut hard on what isn’t working, the honesty to face the market as it is, and the determination to execute with far fewer resources than you’re used to. I believe this team has those qualities.

Closing

Five years ago we set out to build programmable liquidity for DeFi. We built something real — technology that protocols like Aave, Gnosis, Lido, CoW, and dozens of others chose to build on. The v3 architecture is sound, and the products in the pipeline are differentiated. What failed was not the technology. What failed was the economic model wrapped around it, and the accumulated weight of security incidents that eroded the trust we built.

I believe Balancer still has a chance to turn things around and prove to token holders who stay that there can be product market fit and sustainability. The next 12 months will be crucial for the team to prove this possible.

This post reflects my personal views as co-founder and BLabs shareholder. The formal proposals are being authored by the core team and will be published separately for community discussion and vote.

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Nerite supports balancer! Balancer will come back from this in some form or another.

Abandoning veBAL is fine as long as there is another alternative. Tokenomics update is very welcome.

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The Balancer Reckoning Is Not a Balancer Problem

Balancer had revenue. Balancer had integrations. Balancer had a treasury. And Balancer is still winding down its founding entity.

That contradiction is the whole story. And if the industry doesn’t understand it, the next Balancer is already being built right now.

What Actually Broke

The November exploit didn’t create the crisis. It just made it impossible to keep deferring it. What got exposed was a flaw that’s been sitting inside an entire generation of DeFi protocols, not just this one.

The Emissions Trap

The original sin was token-subsidized liquidity. Emit BAL to attract LPs, attract LPs to grow TVL, grow TVL to justify the token price, use token price to fund the team. It made sense at the time. Most of us were doing some version of this.

But the loop has an expiry date. The moment token price came under pressure, the whole thing inverted. Emissions diluted holders faster than fees created value. The veBAL/Aura bribe economy meant the DAO was literally renting votes to direct its own emissions, money going in a circle. The DAO captured only 17.5% of actual protocol fees while bleeding tokens at full rate. And the treasury that looked deep on paper was almost entirely denominated in BAL, a currency the protocol itself kept devaluing.

This is the standard AMM playbook. It was always going to end somewhere like this.

The Treasury Illusion

Being treasury-rich in your own token is like being asset-rich in your own stock. It looks fine until confidence wobbles, and then the asset and the liability move together in the wrong direction.

Governance made it worse. Every structural fix, fee restructure, emissions cut, team reduction, needed proposal cycles, community debate, vote thresholds. Governance moves at governance speed. Confidence crises don’t wait around.

Zero emissions, 100% fee routing to treasury, buyback, that’s the right fix. Fernando knows it. But that should have been the founding design, not what you arrive at when your back is against the wall.

The Corporate Liability Overhang

The BLabs piece is the most underappreciated part of this whole situation. A traditional corporate entity sitting above a decentralised protocol is a structural mismatch. When an exploit hits, the entity absorbs the legal liability, the token absorbs the dilution, the DAO absorbs the governance overhead, and nobody is actually covering the gap between all three.

The DAO/Foundation/OpCo model is the right answer. But it has to be the starting point, not something you restructure into after the exposure has already accumulated.

What the Industry Actually Needs

Fee capture baked in from day one. The 17.5% DAO capture was a political compromise made when TVL was the only metric anyone cared about. By the time you have the leverage to fix it, LPs have dug in. You can’t retrofit sustainable fee architecture onto a protocol that scaled without it.

Behavioral visibility into your own treasury. Which liquidity is actually sticky, which LPs leave the moment incentives shift, which integrations are driving real revenue versus inflating numbers. A protocol with $500M TVL that is 80% mercenary capital is not the same as one with $200M of aligned participants. The dashboards look identical. Onchain behavioral history is the missing layer that makes the difference legible.

Governance that reflects actual alignment, not just token weight. veBAL got captured because capital concentration is not the same as community alignment. One coordinated bloc can redirect governance in ways that have nothing to do with the people actually using the protocol. LP duration, usage history, verifiable onchain behavior, these need to be inputs into governance weight. The tools exist. The willingness to implement this before capture happens, not after, is what’s been missing.

Legal architecture built for decentralisation from the start. BLabs is the clearest example yet of what happens when a corporate entity carries liability for a protocol it no longer fully controls. Foundations with limited liability scope, OpCo structures that separate operational risk from protocol risk. This has to be designed in, not bolted on during a crisis.

Shared security infrastructure. One exploit should not be existential for a protocol with real revenue and real integrations. A shared reserve layer across ecosystems, funded by a small protocol fee contribution, changes this calculus entirely. The coordination is hard but the cost of not solving it is now sitting right there in this post.

Where This Lands

Balancer is not a story about bad technology or a bad team. The v3 architecture works. The people Fernando named have been building through the worst period this protocol has ever seen and they came back with a credible plan.

This is a story about what happens when a protocol that scaled on token-incentivised growth never restructures its economics before it needs to. The exploit was the accelerant. The fuel was already there.

The lean continuation path is real and the team has earned the shot at it.

But for everyone else still running the 2021 playbook: the infrastructure gaps Fernando has been navigating are not unique to Balancer. They are sitting inside most protocols operating today. One bad quarter or one exploit is all it takes. The clock is running.

AJ, CBDO, ZeruAI (https://x.com/zerufinance)

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Thank you for building one of the best protocols in DeFi, for pushing the boundaries of what’s possible for AMMs and making crypto a more interesting space. I’m more bullish on Balancer than ever; I think these changes are for the best. You guys have a great team. You’ve endured the storm and worked really hard to help users recover their funds with very positive results for which all affected users are grateful. Keep it up! Keep innovating!
I’m sorry about the legal headaches. People who invest in crypto and act as if they were investing in a regulated financial institution when things go wrong should stick to regulated financial institutions and their anemic yields.

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