Decentralized exchange Balancer is closing the original development company behind the protocol and turning to a leaner decentralized autonomous organization restructuring to keep operations running. The leadership team cited legal exposure and an unsustainable business model for the structural pivot, according to the official announcement.
Balancer to Close Balancer Labs, Pivot to Decentralized Model After Exploit
24 March 2026 - 12:00 CET
By Sandmark staff
The corporate entity had become a liability rather than an asset following a November 2025 exploit and ongoing revenue challenges, co-founder Fernando Martinelli detailed in a governance forum post. The strategic move marks a clean break between the protocol and its founding company even as core contributors continue operations under a restructured framework.
The leadership team initially considered a full closure but cited the continued fee generation of roughly $1mn annualized as a primary reason to keep the protocol functioning. The underlying problem is not the technology itself but rather a functioning protocol buried under a broken tokenomics model and an overweight cost structure, Martinelli explained.
Tokenomics reset and leaner operations
The native token emissions and the associated governance system created a circular bribe economy that failed to generate sustainable returns, Martinelli said. The system requires users to lock tokens to gain voting power and had become heavily distorted by external actors who no longer reflected the core contributors, he added.
The comprehensive restructuring will significantly reduce operating expenses and narrow the product focus to key areas including automated liquidity pools designed to optimize capital efficiency alongside liquidity bootstrapping pools and stable asset markets, according to the proposal.
Legal pressure and a broader decentralized finance shift
The decision to shut down the corporate entity underscores the growing legal and structural pressures facing decentralized finance projects in the wake of security incidents. Policy research from the European Parliament previously highlighted how these protocols often operate without clear legal entities, complicating accountability and enforcement when systemic failures occur. Martinelli implicitly acknowledged this specific issue by intentionally distancing the protocol from its traditional corporate wrapper.
The broader digital asset sector is steadily moving toward more sustainable and accountable operational models. Rising institutional participation is actively pushing projects to prioritize revenue generation, governance clarity and strict cost discipline over incentive-driven growth, according to recent industry research from PwC.
The co-founder will officially step away from any formal role once the corporate wind-down is complete but plans to continue supporting the project informally. The next 12 months will be critical in determining whether the restructured protocol can achieve long term financial sustainability, Martinelli concluded.
