The decentralised finance industry faced another serious setback when Balancer, one of the earliest automated market makers, suffered an exploit that drained more than $120 million from its V2 protocol and several forked versions.
The incident took place on November 3 and revealed a small but critical arithmetic flaw hidden deep within Balancer’s code. Although the error appeared insignificant, it allowed attackers to manipulate token balances and drain liquidity from multiple networks.
The event not only shocked investors but also raised questions about how such a well-audited protocol could still contain a flaw capable of causing massive financial damage.
How the Balancer Exploit Happened
According to a detailed postmortem by security firm SlowMist, the exploit came from a precision loss bug in the integer fixed-point arithmetic used to calculate scaling factors inside Balancer’s Composable Stable Pools.
These pools were designed for near-equal asset pairs, such as USDC and USDT or WETH and stETH, which normally maintain close price parity.
In this design, precision is vital because even a tiny miscalculation can distort the value ratio between assets.
The attacker began by exchanging Balancer Pool Tokens (BPT) for liquidity tokens. This step intentionally reduced the total liquidity available in the pool, making it easier to manipulate price differences.
The attacker then performed a series of trades between tokens such as osETH and WETH. Each of these trades was designed to create small arithmetic rounding errors.
Although the differences from each trade were minor, they gradually accumulated as the attacker repeated the swaps hundreds of times in a single transaction.
The flaw became more powerful when combined with Balancer’s batch swap function, which allows users to carry out multiple swaps at once. By chaining operations together, the attacker could amplify these rounding errors faster and in larger volumes.
Eventually, the arithmetic miscalculation made Balancer’s smart contracts calculate a higher token output than what was actually owed, allowing the attacker to extract extra tokens during settlement.
After accumulating enough advantage through repeated swaps, the attacker reversed the earlier transactions, swapping tokens back to restore the pool’s visible balance. This made the activity appear legitimate on-chain and helped conceal the manipulation.
When the attack concluded, the exploited pools had settled incorrect token balances, and the attacker walked away with millions of dollars in profit.
Blockchain analysis showed that the attacker moved the stolen assets through Tornado Cash to hide their trail.
The stolen funds were then routed through multiple intermediary addresses and cross-chain services before being reassembled into Ethereum-based wallets holding large amounts of ETH and WETH.
Traces of the exploit were also detected across several blockchains, including Base, Arbitrum, Avalanche, Optimism, Polygon, Gnosis, Berachain, and Sonic.
Balancer’s internal response was immediate. Its emergency security team activated what it called a “war room” to coordinate containment measures. Within minutes, Hypernative’s monitoring system automatically paused newer Composable Stable Pools (CSPv6) to prevent further damage.
However, older pools with expired safety locks could not be paused in time, becoming the main targets of the exploit.
By the end of the day, the estimated losses reached around $116 million according to blockchain forensics.
Balancer confirmed that its other pool types and V3 protocol were not affected. Even so, the event became one of the largest cross-chain attacks in 2025, highlighting how small arithmetic flaws can lead to devastating financial consequences when exploited systematically.
What the Breach Revealed About DeFi’s Weaknesses
The Balancer exploit demonstrated that even projects with strong reputations and multiple audits remain vulnerable to hidden programming errors.
Balancer had completed more than 10 audits with well-known firms such as OpenZeppelin, Trail of Bits, and Certora. However, the flaw was buried inside an “upscale” function used to calculate token values during batch swaps.
This function made a small rounding error when converting between decimal and integer values. As a result, the calculation rounded token quantities slightly in favour of the trader rather than the pool, enabling attackers to exploit the error repeatedly for profit.
What made the incident particularly concerning was that Balancer had faced a similar rounding issue in 2023, though the earlier version caused only minor losses.
The recurrence of a related bug showed that mathematical precision errors remain a difficult category to detect even through extensive audits.
Each swap in Balancer’s system involves a chain of interdependent calculations, and any small rounding discrepancy can compound rapidly across thousands of transactions.
Following the exploit, Balancer’s total value locked (TVL) fell sharply. Data from DeFiLlama showed that TVL dropped from $442 million on November 2 to $214 million within 24 hours, and continued falling below $190 million in the following days.
Many liquidity providers withdrew their assets immediately to avoid further exposure, causing additional downward pressure on Balancer’s ecosystem.
To limit the damage, Balancer disabled its CSPv6 factory to stop the creation of new pools and halted emissions from all affected liquidity gauges. It also enabled a recovery-mode withdrawal feature that allowed liquidity providers to retrieve their tokens proportionally from paused pools.
Security partners across the industry joined the recovery efforts. StakeWise DAO, which had exposure to osETH, recovered approximately $19 million, or about 73% of the lost osETH.
Other coordinated recovery efforts took place across various chains. The Berachain Foundation executed an emergency hard fork that froze around $12 million in stolen funds after negotiation with a miner extractable value (MEV) bot operator who assisted in the recovery.
Gnosis and Monerium froze roughly €1.3 million worth of EURe stablecoins to prevent them from being moved further. Whitehat groups and automated bots on networks such as Base also contributed to the recovery, returning around $750,000.
Despite these efforts, a large share of the stolen funds remained unrecovered. The attacker successfully converted part of the drained assets into ETH and dispersed them through multiple wallets that are now difficult to trace.
The case exposed a broader issue within decentralised finance: cross-chain recovery remains weak, and once funds are bridged and anonymised, retrieving them becomes nearly impossible.
The exploit also reignited discussion about the reliability of code audits in the DeFi sector. Experts now argue that even extensive auditing cannot guarantee safety if testing does not include every possible arithmetic condition.
Small errors in token scaling or price calculation functions can create systemic vulnerabilities. Going forward, protocols are being urged to implement continuous on-chain monitoring, stricter rounding rules, and dynamic circuit breakers that can automatically pause pools when anomalies are detected.
Conclusion
The Balancer exploit stands as one of the most complex and costly DeFi breaches in 2025. What started as a small arithmetic rounding error led to the loss of over $120 million across multiple blockchains.
While the Balancer team, its partners, and whitehat responders managed to recover a portion of the stolen funds, the incident exposed deep-rooted weaknesses in how decentralised systems handle precision and cross-chain security.
The event serves as a critical reminder that even minor coding flaws can have major financial consequences and that true DeFi security depends on ongoing vigilance, not just completed audits.