Balancer Unveils Reimbursement Plan Following $116M Exploit

Executive Summary

Balancer, a popular decentralized protocol, is gearing up to distribute funds recovered from a significant exploit last November. The community-led proposal focuses on specific reimbursements to affected pools. This article highlights the details of the distribution plan, its impact on stakeholders, and the broader importance of cybersecurity in the crypto space.

Proposed Distribution Plan

Two members of the Balancer protocol community submitted a proposal outlining a distribution plan for a portion of the funds recovered from the protocol’s $116 million November exploit. About $28 million from the $116 million heist was recovered by white hat hackers, internal rescuers, and StakeWise — an Ether liquid staking platform. However, the proposal covers only the $8 million recovered by white hat hackers and internal rescue teams, while the nearly $20 million retrieved by StakeWise will be distributed separately to its users.

Non-Socialized Reimbursements

The authors proposed that all reimbursements should be non-socialized, meaning that funds are distributed only to the specific liquidity pools that lost the funds and paid out on a pro-rata basis according to each holder’s share in the liquidity pool, represented by Balancer Pool Tokens (BPT).

In-Kind Payments

Reimbursements should also be paid in-kind, with victims of the hack receiving payment denominated in the tokens they lost to avoid price mismatches between different digital assets, according to the authors.

The Importance of Cybersecurity

The Balancer hack was one of the “most sophisticated” attacks in 2025, according to Deddy Lavid, the CEO of blockchain cybersecurity company Cyvers, highlighting the need for crypto user safety as security threats continue to evolve.

Smart Contract Audits

Top blockchain security firms audited Balancer’s smart contracts, but the audits didn’t save it. Balancer’s code has been audited 11 times by four different blockchain security companies, according to the platform’s GitHub page. Despite the audit, the platform was still hacked, prompting some crypto users to question the value of audits and whether they actually ensure code safety.

Root Cause of the Exploit

Balancer released a post-mortem report on Nov. 5 outlining the root cause of the hack: a sophisticated exploit targeting a rounding function used in EXACT_OUT swaps within its Stable Pools. The rounding function is designed to round down when token prices are input, but the attacker managed to manipulate the calculation so that values were rounded up instead. The attacker combined this flaw with a batched swap — a single transaction containing multiple actions — to drain funds from Balancer’s pools.

Conclusion

Balancer's proposed reimbursement plan highlights the crucial importance of security in the crypto space. While audits are essential, they are not foolproof. Understanding the root cause of attacks and implementing effective reimbursement strategies are paramount to maintaining user trust and the sustainable growth of the decentralized finance (DeFi) ecosystem.