Balancer Labs Blacklists $20 Milion YFII DeFi Pool Without Any Governance Whatsoever

Balancer Labs, the team behind decentralized finance protocol, Balancer has come under fire for blacklisting a pool with up to $20 million worth of funds on its platform. The blacklisting took effect without allowing participants to vote on the decision using the project’s supposed governance token, BAL.

BAL as a governance token should have allowed holders to participate in the decentralized governance decisions that will determine the future of the project. This includes making decisions on protocol fees, new features implementations, etc.

However, as per a post by a Twitter user, @intocryptoast, Balancer Labs had removed a DAI/YFII pool from its front end without calling on the community to decide on the development. YFII is a yield farming-based project forked from Yearn.finance YFI.

A filtered search for YFII on Balancer’s Pool and the YFII/DAI market swap at the time of writing also confirms the blacklisting, although user funds are safe.

It also appears that the latest development is a community tussle with the team at YearnFinance (YFII) forking the Balancer Frontend to ensure that users can provide liquidity in YFII pools via a similar interface. Although Ethereum wallet, MetaMask marks the forked Balancer pool as a phishing attempt, users can still proceed by skipping the warning.

Are Governance Tokens truly for “Governance?”

Balancer Labs have completed a series of community voting on protocol improvements via the use of BAL tokens. However, the latest scenario continues to question the motives behind the launch of the so-called “governance tokens,” and whether DeFi projects are truly decentralized.

Despite being labeled as a tool for governance, these tokens could become irrelevant in deciding what changes are to be made on these DeFi protocols. Also, the fact that Balancer Labs had labeled YFII as a scam token in a new GitHub commit found by @intocryptoast raises a question about what criteria Balancer uses to classify tokens as fraudulent or harmful to investors.

Before the latest blacklisting event, Balancer Labs in June made a significant decision on how the protocol would deal with questionable liquidity distribution and mining rule changes. The voting was conducted on Discord without the use of the BAL token.

Balancer Labs CEO, Timur subsequently apologized and admitted that labeling the YFII pool as a scam was a personal mistake and that they have reinstated liquidity provision for the asset on their platform.

Update: We have updated this article to include information that Balancer Labs reinstated the YFII pool