Balancer Labs Closes for-Profit Entity, DAO and Team Face Challenges in Next 12 Months

Gate News reports that the profit-driven entity behind the decentralized exchange Balancer, Balancer Labs, has announced its closure. This move follows a $128 million hack last November, which drained liquidity pools and posed ongoing legal risks to the protocol. CEO and co-founder Fernando Martinelli stated that the next 12 months are critical for Balancer DAO and the team, as they need to demonstrate the protocol’s market fit and sustainability.

Despite Balancer Labs shutting down, the Balancer protocol itself remains operational. Balancer DAO and the Balancer Foundation will continue to operate, and the protocol is still generating revenue, with annualized total fees exceeding $1 million over the past three months. Martinelli said that the core team will join a new entity, Balancer OpCo, and he will no longer hold an official position, providing only advisory support.

In the future, the protocol will cease issuing new BAL tokens, and all fees will go into the DAO treasury to buy back existing tokens on the market, offering holders a fair exit opportunity. Martinelli pointed out, “If you believe in the restructured Balancer, you can continue to hold; if not, you can exit fairly.”

Launched in 2020, Balancer is a decentralized exchange and automated market maker on Ethereum, innovating with self-balancing liquidity pools to maintain asset ratios. Hackers exploited code vulnerabilities to exchange tokens at low prices, causing deposits to drop from $775 million before the attack to just $154 million, triggering investor panic and withdrawals.

At the time of this announcement, the DeFi sector is experiencing restructuring and layoffs, with projects like Tally, Step Finance, and Parsec shutting down one after another. Industry insiders believe that Balancer’s restructuring offers a reference for other decentralized exchanges to address security risks and market volatility. Over the next 12 months, whether the DeFi market can regain confidence will be a key indicator of the industry’s resilience.