However, that credibility collapsed on Nov. 3, when the blockchain security firm PeckShield reported that Balancer and several of its forks were under an active exploit spreading across multiple chains.
Within hours, more than $128 million was gone, leaving a trail of drained pools, frozen protocols, and shaken investors.
As the drain unfolded, Balancer acknowledged a “potential exploit impacting Balancer v2 pools,” stating that its engineering and security teams were investigating the issue with high priority.
However, the acknowledgment did little to slow withdrawals across integrators and forks.
By the end of the day, DeFiLlama data showed that Balancer’s total value locked (TVL) had decreased by 46% to approximately $422 million from $770 million as of press time.
According to the firm, the vulnerability stemmed from how Balancer calculated pool prices during batch swaps. By manipulating that logic, the exploiter distorted the internal price feed, creating an artificial imbalance that let them withdraw tokens before the system corrected itself.
“Improper authorization and callback handling allowed the attacker to bypass safeguards. This enabled unauthorized swaps or balance manipulations across interconnected pools, draining assets in rapid succession (within minutes).”
Meanwhile, Balancer’s composable vault architecture, which is long praised for its flexibility, amplified the damage. Because vaults could reference each other dynamically, the distortion rippled through interconnected pools.
Grogan noted that the attacker’s address was initially funded with 100 ETH from Tornado Cash, implying the funds likely originated from earlier exploits.
While the exploit itself was technical, its impact was psychological.
Balancer had long been regarded as a conservative venue for liquidity providers, a place to park assets and earn modest, steady yield. Its longevity, audits, and integrations across leading DeFi platforms fostered the illusion that endurance equaled safety. The Nov. 3 breach destroyed that narrative overnight.
He decried the fact that:
“A protocol live since 2020, audited and widely used, can still suffer a near-total TVL loss. That’s a red flag for anyone who believes DeFi is ‘stable.’”
That reaction captured the broader sentiment. In a market that prizes self-custody and verifiable code, confidence had quietly replaced trust as the hidden foundation of DeFi.
Balancer’s failure showed that even mathematically sound systems are vulnerable to unforeseen complexity.
“Whilst [DeFi] foundations are becoming safer and safer, the sad reality is smart contract risk is all around us.”
The Balancer exploit hit at a delicate point for decentralized finance, shattering a brief period of calm. In October, total losses from hacks dropped to a yearly low of just $18 million, according to PeckShield.
However, with a single incident in November, the figure has already surged past $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 enables protocols to connect and build upon one another, also amplifies systemic risk.
When a core protocol like Balancer breaks, the impact ripples instantly through the networks that depend on it.
These quick reactions limited losses, but they also underscored a broader truth showing that DeFi operates without the coordination mechanisms that steady traditional finance.
In this space, there are no regulators, central banks, or mandated backstops. Instead, crisis management relies heavily on developers and auditors working in tandem, often within minutes, to contain the fallout.
Considering this, Robdog said:
[This is] a good reminder why we need to develop better risk management infrastructure.”
Beyond the immediate technical loss, the damage to trust may be harder to repair.
Each major exploit erodes confidence in DeFi’s promise of self-regulating code. For institutional investors considering exposure to the industry, the repeated failures signal that decentralized markets remain experimental.
Karapetsas noted:
“No serious capital allocates into systems that are this fragile.”
That perception is already shaping policy in major economies globally.
As he noted, Balancer underwent more than ten audits, with its core vault contract reviewed by several independent firms; 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 mark of infallibility; rather, it reflects the inherent complexity and unpredictability of decentralized systems where even well-tested code can harbor unseen vulnerabilities.
Authorities in the United States are developing frameworks that would introduce regulations on 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 industry.
