Once Valued at $7 Billion, Veteran DeFi Protocol Decides to Shut Down

Original title: "Once Valued at $7 Billion, Veteran DeFi Protocol Decides to Shut Down"
Original author: Azuma, Odaily News

Balancer, once a leading DeFi protocol, is preparing to wind down operations.

On September 15, Balancer Labs co-founder Marcus Hardt submitted a proposal on the protocol's governance forum, recommending an "Orderly Winddown" of the protocol, halting new business development, gradually transitioning liquidity pools to withdrawal-only mode, and ultimately shutting down the protocol.

This was not a sudden decision. As early as April this year, Balancer, still struggling to recover from last year's hack, passed a restructuring plan—stopping BAL emissions, directing all protocol revenue to the DAO treasury, cutting operating costs, and reducing team size. The core goal of the restructuring was clear—to shrink Balancer to a size that could sustain itself on its own revenue, then bet on v3 for a turnaround.

A few months later, Marcus, on behalf of Balancer, announced that this self-rescue attempt had failed. The veteran DeFi protocol, which once had a peak TVL exceeding $2.4 billion and a token price as high as $74.45 (corresponding to an FDV of over $7 billion), could only fade away quietly.

v3 Failed to Save Balancer's Fate

In this open letter explaining the shutdown decision, Marcus stated that the team had largely completed the previously promised restructuring work.

Token emissions have stopped, the economic functions of veBAL have been removed, all protocol fees flow to the DAO, the operating budget has been reduced by about one-third, and the team size has been compressed to 12.5 full-time equivalent positions. Product development also continued: Balancer's Boosted Pools remain operational, reCLAMM was launched after completing security audits and renamed AutoRange Pools, and the team continued to pursue external integrations and partnerships. Marcus revealed that some partnership negotiations had even reached advanced stages, with partners genuinely interested in certain capabilities of v3.

But the problem is that this interest ultimately did not translate into sufficient revenue.

Currently, most of Balancer's revenue still comes from v2, and v3's revenue growth has not reached the level needed to replace v2. Marcus put it bluntly: "The product works, but it doesn't sell well enough."

If we look for the main reason behind Balancer's current situation, the exploit last November is undoubtedly an unavoidable issue.

Last November, Balancer suffered the most severe attack in its history. Hackers targeted Balancer v2's Composable Stable Pools, using flash loans to exploit complex precision rounding errors and Vault accounting flaws, draining large amounts of staked tokens and stablecoins from the mainnet and multiple L2 chains, ultimately causing a loss of $128 million.

Marcus stated in this open letter that although the incident is in the past, he still underestimated its lasting impact on adoption. Every subsequent partnership discussion often had to start with explaining what happened in the exploit, what changes were made, and why v3 is different from the past. While many partners accepted these explanations, it inevitably led to longer decision cycles and smaller partnership scopes.

By August this year, Marcus could no longer see a funding and revenue path that would allow v3 to continue developing as originally planned. So Balancer chose to stop betting further.

This Time, Even the Treasury Is Set to Be Distributed

According to the proposal details posted by Marcus on the governance forum, if the proposal passes, Balancer will not shut down immediately but will gradually exit according to a longer timeline.

First, on October 30, pausable liquidity pools will be paused and switched to withdrawal-only mode; pools whose contract mechanisms require entering Recovery Mode will also be handled accordingly; for other adjustable pools, protocol fees will be reduced to zero. At the same time, Balancer's bug bounty program will also end on that day.

On October 31, the notice period for existing contributors ends. After that, Balancer will no longer pursue new business development, and the team size will be further reduced, retaining only a small transition team responsible for protocol exit, asset consolidation, and subsequent treasury distribution. The remaining operating budget approved by BIP-918, covering through the end of October, will not be used as new operating funds but will be used according to the shutdown budget, with unused portions eventually returning to the treasury.

Starting in November, Balancer will enter the true "wind-down phase." The team will maintain the minimum infrastructure required for the exit process and gradually revoke low-risk permissions that are no longer needed between November and December 2026. Meanwhile, the DAO will begin consolidating assets and receivables scattered across different wallets, fee addresses, and other locations, completing the collection before the first distribution round. If DAO assets such as code, licenses, and deployments are to be transferred, they will require a separate Snapshot vote and will not be automatically handed over to any party as part of this shutdown.

The remaining treasury assets of Balancer DAO are planned to be returned to BAL holders. The proposal currently discloses that the DAO treasury is at least approximately $9 million. The previously approved BAL buyback program will be canceled, replaced by a distribution mechanism of "burning BAL to claim treasury assets proportionally."

The proposal mentions that the first redemption window is expected to open at the end of May 2027 and last for 6 months. Eligible BAL holders who burn their BAL can claim treasury assets proportionally; two subsequent distribution rounds will follow to handle remaining budgets during the shutdown, assets received later, and unclaimed shares from the first round.

Finally, by the end of July 2028, the protocol will complete its final liquidation, at which point treasury and distribution controls will be revoked, and related entities will gradually complete their closure.

It should be noted that this "shutdown notice" is still only at the governance initiation stage. Balancer expects to hold a Snapshot vote between September 25 and 29. Until the vote results are out, the protocol's current pools and withdrawal functions will not change. If the proposal fails, the existing operational framework will continue.

Another Ending for DeFi After Business Model Failure

From an industry perspective, Balancer's story is somewhat unique. It did not announce its exit only after the product had stopped being maintained and the community had completely disappeared. On the contrary, the team just completed a fairly thorough cost reduction this year, launched new products, and attempted to rebuild revenue sources with v3.

But when these measures still fail to generate sufficient revenue, continuing to maintain a protocol itself becomes a cost. Marcus's logic in the open letter is straightforward—if there is no funding or growth path that can change the status quo, then continuing to drain the treasury will only lead to the same result later. Rather than continuing to invest remaining assets into a proven ineffective path, it is better to stop now and return the remaining value to token holders.

This may be what makes Balancer's shutdown more noteworthy.

Early DeFi projects often relied on token incentives, liquidity mining, and ever-expanding TVL for growth, but as the industry matures, protocols ultimately still need to answer a traditional business model question: whether the product can sustainably generate sufficient real revenue.

Balancer once tried actively to save itself, but now it has chosen to proactively give another answer—if the answer is negative in the long run, then a dignified exit can also be a governance option for a DAO.