Five Balancer Pools Contain an Issue. More Than $6 Million is Under Threat

Balancer is a decentralized DeFi liquidity protocol, which consists of many pools. Each pool contains several tokens that traders can freely swap. Liquidity providers (LPs) can put their tokens into pools in order to receive swap fees. The Balancer infrastructure includes large crypto companies such as 1inch, Aave, Aura, Beethoven X and many others.

On the 6th of January, Balancer announced on Twitter that the commission in some pools were now 0. Stating that this change was made in order to mitigate the damage caused from an issue discovered by their developers, and that the change was implemented through an “emergency multisig”.

Protocol fees of some Balancer pools have been set to 0 to avoid an issue that is now mitigated and will be publicly disclosed in the near future.

This has been done by the emergency multisig, a 4/7 comprised of BLabs engineers and Balancer Maxis: https://t.co/AZo7yBQD17
— Balancer (@Balancer) January 6, 2023

Balancer went on to initially state that the pools would continue to work as normal, and that no action would be required by LPs.

These pools continue to function normally, so no action is needed by LPs of those pools. They will continue to accrue swap fees, but the protocol will not take its cut from them.
— Balancer (@Balancer) January 6, 2023

But, within three minutes, Balancer stated that LPs should withdraw funds from the pools affected by the issue as soon as possible, because the issue cannot be mitigated by an emergency DAO.

IMPORTANT: Because of a related issue, LPs of the following pools should remove their liquidity ASAP as the issue cannot be mitigated by the emergency DAO. https://t.co/WcBeBvjdY2
— Balancer (@Balancer) January 6, 2023

The issue affected DOLA / bb-a-USD pool on the Ethereum mainnet, bb-am-USD/miMATIC pool on Polygon, MAI life and Smells Like Spartan Spirit pools on Optimism, and also Tenacious Dollar pool on Fantom. Total Value Locked (TVL) of all five pools is more than $6 million.

On Polygon:

bb-am-USD/miMATIC (current TVL of ~$9k)https://t.co/pUa9wjZEqI
— Balancer (@Balancer) January 6, 2023

On Fantom where @beethoven_x is a Balancer friendly fork:

Tenacious Dollar (current TVL of ~$1.6M) https://t.co/O0r0Z8mL68
— Balancer (@Balancer) January 6, 2023

The following day, on January 7th, Balancer posted a tweet thanking LPs for their quick reaction. Approximately 85% of the funds were withdrawn from the five pools. Balancer again asked LPs to withdraw the remaining funds until their developers had fixed the issue.

Thank you to everyone who helped amplify our alert yesterday. Because of quick-moving LPs, ~85% of the funds at risk have already been safely withdrawn. We ask that LPs remove the remaining liquidity as Balancer devs continue to work on the fix 👇 https://t.co/PetjATjUU8
— Balancer (@Balancer) January 7, 2023

After this tweet, there were no updates about the issue in the five Balancer pools. We hope that the Balancer developers will be able to fix the issue before some attackers use it, and we continue to observe.