Balancer, a longstanding decentralized exchange protocol built around automated market makers, has put forward a governance proposal to wind down operations after a post-exploit restructuring failed to restore sufficient revenue. The plan, authored by Marcus Hardt, former Balancer Labs CEO and a treasury council member, was published on the protocol’s governance forum on Monday.

Hardt stated that cost reductions and product deliveries under the leaner structure adopted earlier this year succeeded, yet revenue generation fell short of levels needed to sustain the protocol. Most ongoing revenue continues to come from the legacy v2 version, while the newer v3 architecture has not grown enough to offset the shortfall.

Impact of the November 2025 Exploit

The proposal traces the revenue decline to a major security incident in November 2025. Attackers targeted Balancer’s v2 composable stable pools across multiple networks, resulting in losses that climbed above $128 million after initial estimates of around $70 million. The technical root cause was identified as a rounding bug in the upscale function that enabled manipulation of pool balances during swaps involving assets such as WETH, osETH and wstETH.

Affected pools were paused, creation of vulnerable pools halted and rewards stopped while recovery efforts proceeded. Some assets were later returned, including roughly $19 million in osETH recovered by StakeWise and $9.4 million unlocked via a hard fork on Gnosis Chain. A framework was also advanced to distribute about $8 million in rescued funds to liquidity providers on a pro-rata basis.

Monthly protocol revenue, according to DefiLlama data, dropped from $1.13 million in October 2025 to $371,000 in November. The downward trend persisted into 2026, with August revenue recorded at $56,781.

Although the exploit struck only legacy v2 infrastructure and v3 uses a different architecture, Hardt said the incident’s reputational effects continued to hinder adoption.

In a separate statement he acknowledged underestimating the lasting constraint on user traction.

Details of the Proposed Wind-Down

If approved, the orderly shutdown would begin next month. New business development would cease immediately. Liquidity providers would have until October 30 to prepare exits. Pools that can be paused would shift to withdrawal-only status. Pools that cannot be paused would remain operational, with protocol fees set to zero wherever contracts permit.

From November 1 the protocol would retain only the minimal infrastructure required to support withdrawals. The DAO would wind down, leaving a small transition team in place. Up to $400,000 of treasury assets would be allocated to cover wind-down costs, structured as $150,000 from November 2026 through May 2027, $30,000 thereafter, and a $220,000 reserve if needed.

The remaining treasury, currently valued at more than $9 million according to figures from treasury manager kpk, would be distributed in kind and pro rata to BAL holders. BAL tokens and positions that resolve into BAL would be excluded from the pool available for distribution, aside from amounts owed to tetuBAL holders. A previously approved BAL buyback program under BIP-919 would be cancelled.

The first distribution window is scheduled to open at the end of May 2027 and run for six months. Participating holders would burn their BAL tokens to claim their share. A second distribution would follow as an airdrop within two months of the first window’s close, covering unspent wind-down funds, later receipts and unclaimed portions. A final sweep six months later would distribute any remaining assets to the same addresses.

Governance Timeline and Next Steps

The proposal requires approval from BAL holders via a snapshot vote scheduled for September 25 to 29. Rejection would leave the existing operating framework unchanged. Contributor notice runs through October 31, after which the reduced team would manage the transition under the approved budget.

Balancer Labs itself shut down in March after the exploit and associated legal and cost pressures, with the protocol continuing under a leaner structure that cut emissions, restructured fees and reduced headcount. Hardt noted at the time that the corporate entity had become a liability. The latest proposal concludes that the revenue side of that effort did not materialize sufficiently to justify further operations.