Can Balancer emerge from its darkest hour by making a tough decision?

Author: KarenZ, Foresight News

On November 3, 2025, a security incident that resulted in losses exceeding $120 million shattered the illusion of growth for Balancer, a veteran DeFi protocol.

This was the largest security incident in Balancer's history. But the deeper damage lies not in those astronomical figures.

Looking at the financial data attached to Balancer's latest proposal, its fundamentals are already far from optimistic: the protocol's annualized fees are approximately $1.65 million, while the DAO's estimated annualized revenue is only $290,000, accounting for 17.5%.

The remaining funds flowed to veBAL holders, the core pool, the Balancer Alliance plan, and other parties.

The entire system appears to be a continuously operating "money printing machine," but it's actually leaking on two sides: First, transaction fees are lost through multiple layers of distribution; second, the annual inflation of BAL tokens releases approximately 3.78 million tokens, creating a continuous selling pressure of about $580,000 at the current price—considering that BAL's current fully diluted valuation (FDV) is only $11 million. The annual operating budget is a staggering $2.87 million, while annualized revenue is only $290,000, resulting in a shortfall of $2.58 million. The DAO treasury (excluding BAL) has only $10.3 million left. At this rate, the treasury has less than four years to live. Following the security incident, Balancer TVL suffered even more. Balancer TVL plummeted from $800 million to approximately $300 million, and has continued to decrease, currently standing at less than $160 million. It's worth noting that at its peak in 2021, Balancer's TVL (TVL) exceeded $3 billion. Balancer has officially reached a crossroads. On March 23, 2026, the Balancer core team simultaneously released two important governance proposals: a comprehensive reform of the BAL token economics and a restructuring of the operational architecture. The core logic of these two documents can be summarized in one sentence: **abandoning the token release-driven growth model and shifting to revenue-driven sustainable operations.** Operational Restructuring: Team Downsizing, Annual Budget Reduced by 34% The proposal recommends the formal dissolution of Balancer Labs, with its core technical staff being merged into Balancer OpCo Limited as contractors. The latter will continue to operate as the legal representative entity for the DAO. The team size will be reduced from approximately 25 people to a 12.5 full-time equivalent (including dedicated service providers such as Beets and MAXYZ), and the annual operating budget will be reduced from $2.87 million to $1.9 million, a 34% reduction. The product line has also been drastically narrowed. The team will focus its resources on three commercially viable products: Boosted Pools (flagship product), reCLAMM (which will be relaunched after bug fixes and a possible name change), and LBP (token issuance pool, operated opportunistically). Other exploratory directions, such as ETF structured products, yield optimizers, and AI-driven liquidity tools, will only proceed if core KPIs are met. On-chain deployments have also been scaled back. The current model of maintaining V2 and V3 on more than 9 chains is no longer sustainable. The team has clearly stated that it will retain four core chains: Ethereum, Gnosis, Arbitrum, and Base. Other deployments will be reviewed one by one based on fee revenue and operating costs; those that fail to meet the standards will be terminated directly. Token Economics Reform: A Complete Overhaul, Not Minor Fixes Stopping BAL Releases, Abolishing veBAL After the proposal is passed, Balancer will terminate the BAL token incentive release without any transition period. Simultaneously, the veBAL governance mechanism will also be officially abolished. Holders will cease receiving any economic benefits after the last bi-weekly fee distribution; their locked veBAL will become pure governance tokens, awaiting the natural expiration of the lock-up period. This was a painful decision, but the underlying logic is clear: the veBAL mechanism, from its inception, suffered from a structural vulnerability to oligopolistic control. Currently, Aura Finance (the veBAL meta-governance protocol) and whales have amassed significant voting power, making the voice of the real community increasingly weak in governance. This mechanism has not only failed to promote the healthy development of the protocol but has also become a vehicle for a circular economy game—the protocol's money flows to intermediaries through incentives, and the intermediaries' votes then direct even more incentives in their own direction. If veBAL was once an experiment by Balancer, inspired by Curve, the team now admits: the experiment is over, and the results did not meet expectations. Regarding the termination of veBAL economic rights, Balancer stated it will provide a $500,000 compensation program, directly distributed to veBAL holders—pure cash compensation. All transaction fees will go to the DAO treasury, reducing V3 protocol fees. All protocol fees—V2 exchange fees, V3 exchange fees, Yield fees, and LBP fees—will now flow 100% into the DAO treasury, abandoning the old multi-party splitting mechanism. Simultaneously, the V3 protocol fee percentage will be reduced from 50% to 25%. This means that for the same transaction, liquidity providers previously received 50% of the fees, now they receive 75%. These two actions may seem contradictory, but their underlying logic is the same: the former eliminates the circular economy, allowing the treasury to obtain real, usable funds; the latter increases LP attractiveness, exchanging lower platform fees for more organic liquidity and real trading volume. The proposal anticipates that the DAO's annualized revenue after the reform could reach approximately $1.22 million, more than four times the current $290,000. Those who wish to leave can burn BAL at a price of $0.16 per token in exchange for stablecoins. The treasury will also allocate 35% of its assets (currently approximately $3.6 million) as a special pool. Instead of actively buying BAL on the secondary market, it will open a "burn for stablecoins" channel: BAL holders can actively send their tokens to the contract for burning and receive an equivalent amount of stablecoins at the NAV price (net asset value, approximately $0.16 per token). The window will open 12 months after the proposal's passage and last for 12 weeks. Unused stablecoins during this period will be returned to the treasury after the window closes. The 12-month waiting period was designed to allow holders of veBAL to participate as they gradually unlock. As of this writing, the price of BAL is $0.1548, lower than the NAV price. Offering an exit at the NAV price provides those wanting to leave with a more dignified option than a secondary market sell-off. If this channel is fully utilized, approximately 22.7 million BAL tokens will be burned, representing about 35% of the circulating supply, six times the current annual inflation rate. Is a 9-year "runway" enough?

If both proposals pass, the team's calculated financial model is as follows:

The DAO's annualized revenue is approximately $1.22 million (assuming TVL recovers somewhat after the V3 fee reduction), annual operating expenses are $1.9 million, repurchase expenses are approximately $3.6 million, plus $500,000 in veBAL compensation.

After completing the repurchase and compensation, the treasury will still have approximately $6.2 million remaining, and the annual funding gap will narrow from approximately $2.6 million to $700,000, with a theoretical lifespan of nearly 9 years.

For a DeFi protocol, 9 years is sufficient to span a complete industry cycle.

However, this model is built on optimistic assumptions: the reduction in V3 protocol fees will indeed drive more organic TVL; the scaled-down team can truly support the protocol's daily operations and security maintenance; and the core products (especially reCLAMM) can successfully re-attract the market after the fix. Any aspect falling short of expectations will rapidly shorten the 9-year lifespan. The team itself has also made it clear that if DAO monthly revenue falls below $60,000 for three consecutive months, a revised plan must be submitted to the community. For Balancer, this is a near-all-or-nothing reform. Abandoning the once-proud veBAL mechanism and the complex multi-party revenue-sharing structure, it returns to an extremely simplified starting point: letting real transaction fees drive the protocol's survival, rather than maintaining a false prosperity through newly minted tokens. Whether this do-or-die reform will be effective ultimately depends on the market and time; we await long-term observation.