Balancer Suffers $116 Million DeFi Exploit, Highlights Industry Vulnerabilities
Balancer experienced one of the largest decentralized finance (DeFi) exploits on Monday, losing more than $116 million in staked Ether and liquidity pool tokens drained from its Balancer v2 contracts and several forks. The decentralized exchange (DEX) and automated market maker (AMM) discovered that faulty access control in its smart contracts allowed attackers to withdraw funds directly from liquidity pools.
The exploit initially caused a $70 million loss, which quickly escalated to $116 million. The attack primarily affected liquid staking assets such as Lido’s wstETH and StakeWise’s osETH. In an effort to recover losses, Balancer offered a 20% white hat bounty to the attackers. The team also announced cooperation with law enforcement and blockchain forensics to identify those responsible.
On Tuesday, the incident drew community scrutiny as many noted the extensive audits Balancer had undergone. “Balancer went through 10+ audits,” stated Suhail Kakar, developer relations lead at the TAC blockchain. The hack appears to have involved months of planning by a skilled attacker. Conor Grogan, director at Coinbase, suggested that the hacker was experienced and may have had funds linked to previous exploits.
On Thursday, Balancer published a preliminary post-mortem report detailing the $116 million breach. The protocol confirmed a sophisticated code exploit targeting its v2 Stable Pools and Composable Stable v5 pools.
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Stream Finance’s $93 Million Loss Triggers Ecosystem-Wide Ripple Effects
In a separate blow to DeFi, decentralized protocol Stream Finance disclosed a $93 million loss tied to an external fund manager on Tuesday. This event triggered stablecoin depeggings and liquidity freezes across the ecosystem due to asset associations.
DeFi analysts noted the protocol’s collapse caused ripples throughout DeFi, with millions exposed to the protocol’s synthetic assets. Researchers from Yields and More estimate over $284 million in loans and stablecoins are linked to Stream Finance’s xUSD, xBTC, and xETH.
Protocols such as TelosC and Elixir were among the most affected, with Elixir’s $68 million exposure representing about 65% of its stablecoin reserves. On Friday, Elixir withdrew support for its synthetic stablecoin deUSD. The protocol successfully processed redemptions for 80% of all deUSD holders, which caused the token to lose its dollar peg.
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RedStone Introduces Credora, a DeFi Risk Ratings Platform
Modular oracle network RedStone recently launched Credora, a DeFi-native risk ratings platform that integrates real-time credit and collateral analytics. Credora provides dynamic risk scoring and default probability data through APIs to protocols including Morpho and Spark.
This launch marks a shift toward data-driven transparency following the market volatility that erased $20 billion in positions in October. RedStone’s move aligns with broader industry trends toward a lower-risk DeFi ecosystem, where oracles, auditors, and analytics firms collaborate to assess the sustainability of yield and collateral systems.
Alongside RedStone, Chainlink, S&P Global Ratings, and Hacken have also indicated that verifiable creditworthiness, rather than speculative yield, will shape the next phase of DeFi.
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DeFi Protocols Form Ethereum Protocol Advocacy Alliance (EPAA)
A coalition of leading DeFi protocols has formed the Ethereum Protocol Advocacy Alliance (EPAA) to enhance Ethereum’s policy representation in Washington. Members include Aave, Uniswap, Lido, Curve, Spark, Aragon, and The Graph.
The alliance aims to balance the “outsized influence” of centralized crypto companies in shaping US regulations. The EPAA plans to engage directly with policymakers to educate them on the technical realities of decentralized infrastructure.
Backed by the Ethereum Foundation, the coalition intends to produce educational materials, provide technical expertise, and coordinate messaging on issues impacting non-custodial systems and DeFi governance. Ultimately, the EPAA seeks to ensure that on-chain protocols, not just centralized projects, have a say in defining crypto’s regulatory future.
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Web3 Gaming and DeFi Lead October Sector Activity Amid Overall Market Contraction
Despite an overall drop in Web3 engagement, DeFi remained one of the most active crypto sectors in October. According to a DappRadar report, DeFi accounted for 18.4% of decentralized application (DApp) activity.
Data showed that DeFi total value locked (TVL) declined 6.3% to $221 billion in October and fell another 12% in early November to $193 billion. DappRadar attributed these losses to the $20 billion liquidation event in October and Stream Finance’s collapse.
Nevertheless, platforms such as Raydium, Pump.fun, and Jupiter Exchange continued to experience strong usage, highlighting resilience in certain parts of the ecosystem.
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DeFi Market Overview: Cryptocurrencies Mostly in the Red
Data from Cointelegraph Markets Pro and TradingView revealed that most of the top 100 cryptocurrencies by market capitalization ended the week trading lower. The Stables Labs USDX (USDX) token saw the biggest drop, falling over 69% during the week. This was followed by Paparazzi Token (PAPARAZZI), which declined by 54%.
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Thank you for reading our summary of this week’s most impactful DeFi developments. Join us next Friday for more stories, insights, and education from this dynamically advancing space.
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