@DAM , thank you for bringing this proposal forward and for your constructive engagement. I second @0xDanko sentiment. In the end, Balancer is a DAO governed by its token holders.
I want to provide a data driven perspective as this will give clarity on the potential effects of modifying the fee model for a compensation fund. For this purpose, I will take data before and after the hack based on our fee allocation repository that will provide clear insights of what to expect.
In summary, I believe at the current state the protocol is in, any compensation fund would hurt our economics more than bring value to affected users.
Analyzing Fee Performance since the exploit
Since the exploit in November 2025, we’ve completed 5 biweekly fee allocation cycles. Here’s what the data shows:
| Period Ending |
Total Fees |
Core Pool Incentives |
veBAL Passive Fees |
DAO Fees |
| 2025-11-20 |
$123,940 |
$21,282 |
$78,481 |
$21,733 |
| 2025-12-04 |
$72,115 |
$16,629 |
$41,507 |
$12,807 |
| 2025-12-18 |
$56,743 |
$13,052 |
$23,616 |
$9,942 |
| 2026-01-01 |
$66,127 |
$7,625 |
$45,021 |
$11,514 |
| 2026-01-15 |
$49,398 |
$11,026 |
$28,246 |
$8,693 |
| Total (10 weeks) |
$368,323 |
$69,614 |
$216,871 |
$64,689 |
The data shows a clear downtrend since the exploit with each fee collection period generating less revenue. The reasons are manyfold in my opinion: reduction in TVL from nearly 1bln to 270 mln as of today, market downturn with ETH derivates having approximately 10-20% price deprecation and overall less volume as well as the transition to the new v3 model in terms of liquidity utilization.
If we take this data and approximate annualized values, we end up at current rates:
- Total protocol fees: ~$1.91M/year
- Core pool incentives (voting incentives to HH, StakeDAO, Paladin): ~$362k/year
- veBAL passive fees: ~$1.13M/year
Pre-Hack vs post-hack performance: 84% Drop in Protocol Fee income
For comparison, here is what fee collection looked like before the exploit:
| Period Ending |
Total Fees |
| 2025-10-09 |
$564,143 |
| 2025-10-23 |
$521,014 |
| 2025-11-06 |
$281,139 |
- Pre-hack biweekly average: ~$455,000
- Post-hack biweekly average: ~$73,700
- Decline: approximately 84%
This context is important because any fee-based compensation mechanism is directly tied to protocol activity, which has dropped substantially. Of course, we had a strong October also driven by Plasma fees but the fact remains that overall protocol fee income decreased drastically and reflects the >70% in TVL drop on Balancer v2 and v3.
Another good example is our tracking of protocol performance on one of the Dune dashboards I built:
Scenario Analysis: Diverting veBAL Passive Fees
The given examples by @DAM are valuable and compare with how other protocols dealt with exploits.
Based on the suggested tranches (5%, 10%, 20%), here’s what diverting from veBAL passive fees would yield:
| Diversion % |
Annual Amount |
12-Month Fund |
24-Month Fund |
48-Month Fund |
% of $94.9M Loss Covered (48mo) |
| 5% |
~$56,400 |
$56,400 |
$112,800 |
$225,500 |
0.24% |
| 10% |
~$112,800 |
$112,800 |
$225,500 |
$451,100 |
0.48% |
| 20% |
~$225,500 |
$225,500 |
$451,100 |
$902,200 |
0.95% |
Scenario Analysis: Diverting Core Pool Incentives (Bribes)
| Diversion % |
Annual Amount |
12-Month Fund |
24-Month Fund |
48-Month Fund |
% of $94.9M Loss Covered (48mo) |
| 5% |
~$18,100 |
$18,100 |
$36,200 |
$72,400 |
0.08% |
| 10% |
~$36,200 |
$36,200 |
$72,400 |
$144,800 |
0.15% |
| 20% |
~$72,400 |
$72,400 |
$144,800 |
$289,600 |
0.31% |
Combined Scenario: Both veBAL + Core Pool Incentives
| Diversion % |
Annual Amount |
48-Month Fund |
% of $94.9M Loss Covered |
| 5% |
~$74,500 |
$297,900 |
0.31% |
| 10% |
~$149,000 |
$595,900 |
0.63% |
| 20% |
~$297,900 |
$1,191,800 |
1.26% |
Even under the most aggressive scenario modeled (20% diversion from both veBAL fees AND core pool incentives for 48 months), we would accumulate approximately $1.2M — covering roughly 1.26% of the $94.9M loss.
Of course these numbers assume our current protocol income under-performance. I would suggest we reassess this approach in 6-12mo when we regain market trust and attract liquidity again.
Of course these numbers assume our current protocol income under-performance. I would suggest we reassess this approach in 6-12mo when we regain market trust and attract liquidity again.
Secondary Effects to Consider
As others have noted, diverting from these pools creates cascading effects:
- veBAL passive fees reduced → Reduced yield for veBAL lockers → Potential unwinding of positions → Reduced governance participation → Further price/liquidity decline
- Core pool incentives reduced → Reduced bribes → Lower gauge vote efficiency → Reduced incentive for LPs → Lower liquidity → Lower fees → Compounding negative spiral
At current depressed volumes, reducing yields further risks accelerating the downward pressure rather than creating meaningful compensation.
DAO treasury
I would advise against using treasury funds to pay victims (for now). Even if let’s say 50% of victims could be made whole with $1mln from the treasury, it would significantly reduce the protocol’s runway. Given income is already thin, these funds are currently needed more than ever to fund legal teams and keep the protocol alive.
The only option I could think of is to divert some BAL emissions towards a recovery fund but then this would create sell pressure on an already highly inflationary token. Given all these facts it is really tough to come up with a sustainable recovery effort given our current situation.
Conclusion
I echo @0xDanko sentiment that if veBAL holders were willing to sacrifice some yield, directing those funds toward maintaining DAO runway and continued development may better serve long-term recovery prospects — which ultimately benefits affected users more than a token gesture.
The path to making users whole likely depends on protocol recovery, potential legal/recovery efforts, and sustained growth rather than fee reallocation at current volumes.
Happy to provide additional data breakdowns if helpful for the discussion.
Data Sources
Repository: GitHub - BalancerMaxis/protocol_fee_allocator_v2
- Fee allocation reports: fee_allocator/reports/
- Summary data: fee_allocator/summaries/v2_recon.json, fee_allocator/summaries/v3_recon.json
- Individual fee collection files: fee_allocator/fees_collected/
Dune: https://dune.com/xeonus/balancer-protocol-performance
