$128 million stolen, 27 forked protocols caught in the crossfire: Three lessons the Balancer incident offers to DeFi.

Author: Frank, PANews

On November 3rd, a hole was torn in the sky of the DeFi world. An unusually large amount of funds was transferred from the vault address of Balancer, a veteran DeFi protocol. In the following hours, the entire industry witnessed a real-time unfolding of a disaster, with the amount of money lost rising from the initially reported $70 million to $116.6 million, eventually stabilizing at a staggering $128.64 million.

Behind the huge losses is the fact that the Balancer V2 protocol has as many as 27 "forks", which also face the systemic risks brought about by this long-standing fatal vulnerability.

Balancer V2 was hacked, and $128 million was stolen.

On November 3, on-chain security company PyShield noticed abnormal transfers in the Balancer V2 vault. A large amount of wrapped Ethereum (WETH) and liquidity-staking derivatives (wstETH, osETH) were transferred to a new wallet.

The Balancer team quickly confirmed the on-chain attack, and as on-chain monitoring continued, the final estimated damage reached $128 million. The Balancer team stated that the attack was strictly limited to V2 composable stable pools. Its newer V3 architecture and other V2 pool types (such as weighted pools) were unaffected.

As of November 4, the Balancer team had not yet disclosed the specific reason for the attack. However, according to analysis from several security companies and on-chain analysts, the root cause of the attack lies in a "faulty access-control check".

The attacker sent a maliciously crafted command to the vault by invoking the `manageUserBalance` function of the V2 protocol. This command tricked the protocol's internal ledger into believing that "the protocol has just collected a large fee" and that "ownership of this fee belongs to the attacker." The attacker then made a legitimate withdrawal request, transferring a huge sum of assets to their own account.

From a technical perspective, the success of this attack wasn't due to superior technical skills, but rather the attacker's clever exploitation of logical vulnerabilities in the protocol. Some analysts believe that the hacker left console logs during the attack, and based on these patterns, it's highly likely that the hacker used a large AI model to write and review the code, thereby uncovering flaws missed by human auditors.

27 forked protocols were caught in the crossfire, prompting various blockchains to activate emergency measures.

Compared to the hackers' ingenious attack methods, what truly disappoints the industry is that Balancer V2 had been audited a total of 11 times by four different security companies—OpenZeppelin, Trail of Bits, Certora, and ABDK—yet they still failed to discover this vulnerability.

Ironically, the specific component that was exploited, the "Composable Stable Pool," had been audited by Certora and Trail of Bits in September 2022.

As a DeFi protocol that has been online for many years and appears to have been tested by the market, Balancer V2 has spawned as many as 27 "Fork protocols," all of which inherit this logical vulnerability from Balancer V2. For hackers, this vulnerability is like having a master key, allowing them to unlock the vaults of these "forked protocols" that also have flawed code at any time.

In fact, this hacking attack has spread to multiple blockchains. Ethereum's Balancer V2 (main protocol) suffered the most severe damage, with estimated losses reaching $100 million. Next was Berachain's BEX protocol, with potential losses of $12.86 million. In addition, the protocols of seven other public blockchains, including Arbitrum, Base, and Sonic, were also affected in this attack.

Faced with this unexpected disaster, the industry faces a dilemma: should it adhere to the decentralized fundamentalism of "code is law" and stand by and watch users' funds be stolen? Or should it take centralized intervention measures to protect users?

Berachain, the hardest hit, made its most radical and controversial decision: coordinating validator nodes to suspend the entire network. By rolling back transactions, Berachain saved over $12 million in assets at risk on the BEX exchange.

Of course, this inevitably sparked controversy within the community, with some questioning: "Won't this completely compromise the finality and security of your 'chain'? Now it's more like a private chain than a public blockchain, isn't it?" In response, Smokey the Bera, the anonymous co-founder of Berachain, replied: "I think your concerns are reasonable, but I believe that extraordinary circumstances require extraordinary measures—we have seen similar approaches in cases like Sui and Hyperliquid in the past."

Most community members support the decision, since the negative impact of a severely damaged fund pool may far outweigh the so-called "decentralization" belief.

The Sonic Chain activated an "on-chain account freeze mechanism," locking the attacker's wallet and $3.4 million without halting the network. Polygon's validator nodes began actively "censoring" transactions originating from the attacker's address.

Multiple vulnerability incidents have occurred, and the reduction of TVL (Total Value Limit) has triggered a crisis of trust.

Balancer's history is essentially a history of constantly battling complex logical vulnerabilities. Previously, Balancer has suffered multiple hacker attacks, with at least five vulnerability incidents occurring between 2020 and 2025. These attacks range from early flash loan attacks to more complex V2 enhanced pool vulnerabilities.

However, in past cases, the losses were generally between several hundred thousand and two million US dollars. For Balancer, these past attacks were more like opportunities to patch vulnerabilities. But this disaster, with estimated losses exceeding one hundred million, has directly shattered the market's trust and confidence in Balancer.

According to data from Defillama, following the attack, Balancer's TVL (TVL) plummeted from $776 million to $345 million, a drop of more than half. Balancer V2's TVL decreased by a staggering $230 million, and its forks also saw their funds withdrawn from pools. Specifically, Gaming DEX's TVL dropped by 87% in a single day, while Beets DEX's dropped by 48%.

Lido also stated that although the Lido Agreement was unaffected, it has withdrawn its unaffected Balancer positions out of caution.

In fact, forked protocols like Gaming DEX later stated that they were not actually affected, and that most of their funds were withdrawn simply for security reasons.

For DeFi protocols, trust is more important than gold, especially given their history of repeated attacks. As of November 4th, according to official sources, StakeWise DAO has recovered over $20 million in losses from hackers through multi-signature protocol contract calls. This brings the total amount lost in this attack to $98 million. Meanwhile, the transfer of the hackers' assets is still ongoing, with over half already converted into ETH.

This $128 million attack became a costly but necessary lesson in the growth of DeFi, and also raised three sharp questions.

1. When 11 audits by the "gold standard" failed to uncover a fatal flaw that had been lurking for two years, what is the point of the "audit"?

2. When "code contagion" becomes the norm, and a vulnerability in a basic protocol can instantly destroy 27 derivative protocols, is DeFi's composability an innovation or a curse?

3. When emerging public blockchains are forced to choose between "decentralization" and "saving users," has the ideal of "code is law" given way to "pragmatic centralization"?

In the future, DeFi security may no longer rely solely on more audits, but rather on simpler, more robust protocol designs that fundamentally reduce the attack surface. For those users who lost trust and capital in this incident, the cost of this realization will be incredibly heavy.