For years, Balancer was one of DeFi’s most trusted institutions, a protocol that had survived several bear markets, audits, and integrations without scandal.
However, that credibility collapsed on November 3, when blockchain security firm PeckShield reported that Balancer and several of its forks were being actively exploited and spread across multiple chains.
Within hours, more than $128 million had disappeared, leaving a trail of drained pools, frozen protocols and shocked investors.
PeckShield data showed that the platform’s protocol on Ethereum suffered the heaviest losses: around $100 million. Berachain followed with $12.9 million, while Arbitrum, Base, and smaller forks like Sonic, Optimism, and Polygon recorded lower but still significant thefts.
As the drain unfolded, Balancer acknowledged a “potential exploit affecting Balancer v2 pools,” stating that its engineering and security teams were investigating the issue as a high priority.
However, the recognition did little to slow the retreat among integrators and forks.
At the end of the day, data from DeFiLlama showed that the total value of Balancer (TVL) had fallen 46% to around $422 million, compared to $770 million at the time of writing.
What happened?
Preliminary forensic investigation of blockchain security company Phalcon indicated that the attacker targeted Balancer Pool Tokens (BPT), which represent user shares in liquidity pools.
According to the company, the vulnerability stemmed from the way Balancer calculated pool prices during batch swaps. By manipulating that logic, the exploiter disrupted the internal price feed, creating an artificial imbalance that allowed them to withdraw tokens before the system corrected itself.
Crypto analyst Adi wrote:
“Improper authorization and callback handling allowed the attacker to bypass security. This enabled unauthorized swaps or balance manipulations in interconnected pools, draining assets in rapid succession (within minutes).”
Meanwhile, Balancer’s composable vault architecture, long praised for its flexibility, has increased damage. Because vaults could reference each other dynamically, the distortion rippled through interconnected pools.
Interesting is Conor Grogan from Coinbase pointed out that the attacker’s approach suggested professional sophistication.
Grogan noted that the attacker’s address was initially funded with 100 ETH from Tornado Cash, implying that the money likely came from previous exploits.
“People don’t usually park 100 ETH in Tornado Cash just for fun,” he says wrotesuggesting that the transaction pattern reflected an experienced and previously active hacker.
DeFi confidence is collapsing
While the exploit itself was technical, its impact was psychological.
Balancer has long been considered a conservative platform for liquidity providers, a place to park assets and earn modest, stable returns. The longevity, audits, and integrations on leading DeFi platforms fueled the illusion that endurance equaled security. The November 3 breach destroyed that narrative overnight.
Lefteris Karapetsas, founder of the crypto platform Rotki, called it “a collapse of trust” and not just a hack of the DeFi platform.
He denounced the fact that:
“A protocol that has been live, monitored, and widely used since 2020 could still suffer a near-total TVL loss. That’s a red flag for anyone who believes DeFi is ‘stable’.”
That response reflected broader sentiment. In a market that values self-control and verifiable code, trust has quietly replaced trust as the hidden foundation of DeFi.
Balancer’s failure showed that even mathematically sound systems are vulnerable to unforeseen complexity.
Robdog, the pseudonymous developer of Cork Protocol, said:
“While [DeFi] Foundations are becoming more and more secure, but the sad reality is that the risk of smart contracts is all around us.”
Implications for DeFi
The Balancer exploit reached a sensitive point for the decentralized finance sector, disrupting a brief period of calm. According to PeckShield, total losses from hacks fell to an annual low of just $18 million in October.
However, a single incident in November has already pushed the figure above $120 million, making it the third-worst month for DeFi breaches in 2025.
Meanwhile, this attack highlights a fundamental paradox at the heart of DeFi: composability, the feature that allows protocols to connect and build on each other, also increases systemic risk.
When a core protocol like Balancer breaks, the impact immediately ripples through the networks that depend on it.
On Berachain, validators paused block production to prevent contamination. Other protocols followed with temporary suspension of lending and bridging functions.
These rapid responses limited losses, but also underscored a broader truth that shows DeFi operates without the coordination mechanisms that stabilize the traditional financial sector.
In this space there are no regulators, central banks or mandatory safety nets. Instead, crisis management relies heavily on developers and auditors working together, often within minutes, to limit the impact.
Considering this, Robdog said:
[This is] a good reminder of why we need to develop better risk management infrastructure.”
In addition to the immediate technical loss, the damage to trust may be more difficult to repair.
Each major exploit undermines confidence in DeFi’s promise of self-regulating code. For institutional investors considering exposure to the sector, the repeated failures indicate that decentralized markets remain experimental.
Karapetsas commented:
“No serious capital is being allocated to systems that are this vulnerable.”
This perception is already shaping policy in major economies worldwide.
Suhail Kakar, a leading web3 developer, marked a sobering reality in the wake of the Balancer exploit: even multiple, high-profile security audits cannot guarantee security in DeFi.
As he noted, Balancer underwent more than ten audits, with the nuclear vault contract reviewed by several independent companies; yet the protocol still suffered a major breach.
Kakar’s point highlights a growing sentiment in the industry that “audited by X” is no longer a sign of infallibility; rather, it reflects the inherent complexity and unpredictability of decentralized systems, where even well-tested code can harbor invisible vulnerabilities.
Authorities in the United States are developing frameworks that would introduce regulations for DeFi protocols. Industry observers expect the Balancer exploit to accelerate these efforts as policymakers grapple with the growing risk of continued integration between crypto and the traditional financial sector.
