~27M S Reallocation to Beets V2 LPs Affected by the Balancer Exploit

General
1

Summary

This proposal requests that 27,129,103 S from the remaining Sonic airdrop budget be allocated to the Beets V2 LPs impacted by the Balancer V2 Composable Stable Pool exploit, and is intended to bring affected users as close to whole as reasonably possible. These LPs have consistently supported S, stS, and core liquidity on Beets over multiple cycles.

Tokens would be distributed as locked Aave-boosted wS | stS positions with a 2-year cliff, recognising this cohort’s long-term commitment while reinforcing Sonic’s liquidity base, and deepening stS infrastructure.

To further align Beets with long-term Sonic network health, Beets commits to the following:

  • Beets will burn an amount of S equivalent to 10% of protocol revenue generated on Sonic over a two-year period.

  • 10% of the Beets treasury (calculated at the time of passing) will be allocated to acquire S on the open market and held as a long-term reserve.

Voting Options

  • Option 1 – Approve: Allocate 27,129,103 S from the remaining airdrop budget to impacted Beets V2 LPs as locked 2 year positions.

  • Option 2 – Reject: Keep the remaining airdrop budget on its current trajectory.

Preface

The Sonic airdrop accelerated early growth on the Sonic network and applications, but it has now become less effective in the current market. At the same time, loyal S, woS, and stS token holders in Beets V2 Liquidity positions experienced losses resulting from the industry-wide Balancer V2 Composable Stable Pool exploit.

The most affected pool on Sonic was the stS/wS LP, one of the network’s core sources of liquidity and a primary route supporting Sonic’s Liquid Staking and Aave integrations.

LPs participated in good faith in infrastructure that, while audited and widely adopted, was later found to contain an unexpected vulnerability. The impact was not limited to pool-level losses - it temporarily weakened confidence in stS liquidity pathways and slowed capital flows that the Sonic ecosystem relies on.

Redirecting a portion of the remaining airdrop budget offers a practical way to stabilise affected participants while reinforcing the liquidity structures Sonic depends on. The lock ensures a solid foundation for DeFi growth over the next 2 years, not only on Beets but throughout the entire Sonic ecosystem.

Background & Rationale

The Balancer V2 Composable Stable exploit exposed a shared architectural weakness affecting multiple DeFi ecosystems. Although the exploit sat at the DEX layer, its consequences on Sonic were concentrated in Beets V2 pools — especially the stS/wS pool, which accounted for roughly 10% of total stS TVL.

The incident disrupted:

  • stS liquidity routing

  • Aave supply and borrow conditions (limiting stS liquidation depth)

  • LST confidence

  • Capital efficiency strategies built on top of stS

Now that Season 1 and 2 of the airdrop have been completed, there are a remaining 92,162,243.87 S tokens allocated for the airdrop. The remaining airdrop budget was originally earmarked for future emissions.

If approved, 27,129,103 S would be reallocated to impacted LPs, leaving 65,033,140.87 S available for future airdrop use.

This reallocation of ~27M S improves long-term alignment, supports one of Sonic’s most critical liquidity layers, and avoids extending an emissions programme whose marginal benefit is declining.

Core Proposal

This proposal requests that Sonic governance:

  • Reallocate 27,129,103 S from the remaining airdrop budget.

  • Distribute these tokens to the LPs impacted by the Balancer V2 Composable Stable Pool exploit, proportional to verified LP exposure (wS | stS & wOS | wS pools) at the time of the incident.

  • Issue the allocation as locked Aave Boosted wS | stS positions with a 2-year cliff (meaning the positions cannot be withdrawn or unlocked for the first two years).

  • Have the Beets team design, build, audit and deploy the smart contract architecture required to implement this solution.

  • Beets will burn an amount of S equivalent to 10% of protocol revenue generated on Sonic over a two-year period.

  • 10% of the Beets Treasury (calculated at the time of the proposal passing) will be used to acquire S on the open market.

This proposal does not introduce new inflation or additional emissions; it redirects the existing airdrop budget toward a use that strengthens Sonic’s liquidity, supports its most loyal and long-term aligned users, and helps make impacted LPs whole.

Network Impact

This reallocation reinforces critical components of Sonic’s liquidity and LST infrastructure:

  • Rebuilds confidence in stS liquidity

  • Deepens swap paths for S ↔ stS

  • Supports Aave stS E-Mode capacity

  • Strengthens the foundation for future stS-based products

  • Aligns incentives with long-term liquidity stability

  • Introduces a deflationary component to S through scheduled burns

Beets operates Sonic’s primary LST and has been a core part of the network since launch. Supporting the LPs affected by this DEX-layer issue reinforces Sonic’s most important yield and liquidity pathway.

Distribution Transparency

A full list of impacted LP addresses and their corresponding S allocation amounts (based on verified exposure at the time of the exploit) has been compiled.

This list is included here to ensure clarity, accountability, and full transparency in how the proposed reallocation would be distributed.

Affected LP Address List: V2 exploit user data

Voting Options

Option 1 – Approve

Reallocate 27,129,103 S from the remaining airdrop budget to provide 2-year locked positions to affected Beets V2 LPs.

Option 2 – Reject

Continue deploying the remaining airdrop budget as originally intended.

Closing Statement

This proposal provides a targeted, disciplined response to a disruption affecting Sonic’s core liquidity infrastructure. By reallocating part of the remaining airdrop budget into long-horizon, locked positions, Sonic strengthens:

  • Its liquidity base

  • Its LST foundation

  • Its alignment with early good-faith participants

  • Its long-term economic stability

Instead of extending emissions that offer diminishing returns, this proposal redirects resources toward structural reinforcement - a decision aligned with Sonic’s next phase of growth.

9 Likes
2

Hi,

Great proposal subject to the following edit I’d like to add on:

  • Reallocate 20,000,000 S from the remaining airdrop budget to my wallet, to compensate for the mark to market losses incurred by myself from holding S throughout the period that commitments and promises were made by Sonic Labs representatives.

  • Distribute these tokens to me as I was impacted by the inaccurate and misleading promises made.

  • Issue the allocation as liquid S to my wallet

I will then undertake to not take legal action against Sonic Labs, Beets.fi, or any other party, for these commitments and promises, as well as this self-dealing proposal to reimburse Sonic Labs’ Directors’ losses masked behind a governance process that is ultimately solely decided by their own governance power.

This addition to the proposal enhances its credibility, removes obstacles, and ensures a smooth path to self-dealing, without pesky opposition and prohibitive legal matters to handle.

Excited for Sonic to continue pushing boundaries!

3 Likes
3

Made an account just to reply here.

Questioning why anyone would vote yes? Airdrop funds were meant to grow the Sonic ecosystem and attract new users to transact / use the chain. Allocating 4.5x the Season 2 Airdrop allocation to Beets does not make sense.

I would rather see SL give a grant to Beets if they choose to do so than spend community growth funds.

6 Likes
4

How is it fair to allocate funds, which were allocated as incentive to boost network activity, to be assigned to support asset of one dapp?

The network is almost dead and the 27M S can be leveraged to revive the volume. Its outrageous to claim this fund to fill the hole created due to exploitation of a dapp.

Yet another blunder in making.

4 Likes
5

Made an account to highlight responses getting hidden by team.

Obviously this is an awful idea.

Labs doesn’t even have the stones to post on its own Twitter that this is happening and have got Beets to do it. Impressed by the bold leadership of hiding from criticism.

4 Likes
6

In favour of this proposal.

The airdrop was an experiment that despite best efforts failed to gain any meaningful traction. The TVL expansion on Sonic and subsequent decline is evident of mercenary capital coming into the ecosystem with the sole purpose to farm and dump $S. This was net negative to the ecosystem.

Reallocating $S to recover Beets victims losses is a net positive to the ecosystem. Beets are one of the longest standing protocols on Fantom and now Sonic and the same applies to its userbase. Many community members have been deeply impacted by the exploit on Beets.

8 Likes
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Hi, @BennySnatch Sonic Labs didn’t make this post, and the Labs validators will not vote on the proposal.

8

So I agree with the plan! Sonic still needs a few years anyway to rise to the level of Fantom back then.

4 Likes
9

I’m voting to Reject.

While I appreciate the intent behind helping users impacted by the Balancer V2 exploit, this proposal ultimately misallocates community resources and sets a harmful precedent.

A few key points:

1. A large portion of “impacted” funds belong to Sonic Labs team wallets and affiliated entities.
This effectively becomes an internal reimbursement rather than true community relief. Using the airdrop budget, which was meant to incentivize network growth and distribution, to offset internal exposure is misaligned with the purpose of that allocation.

2. It’s unreasonable to ask the broader Sonic community to cover a DEX-layer failure.
The vulnerability was not specific to Sonic, but Beets’ implementation. Reimbursing these losses with Sonic airdrop funds effectively socializes costs created by another protocol’s architectural choices. That’s a precedent we should not set.

3. Responsibility lies with the parties who designed, operated, and approved the pool architecture—not with Sonic network participants.
Calling for Sonic’s ecosystem funds to make LPs whole (especially when many of those LPs are internal / team wallets) feels like shifting accountability rather than addressing the root issue.

4. The remaining airdrop budget still has meaningful value for long-term user acquisition.
Redirecting 27M S to cover an external operational failure provides no network-level ROI and weakens future strategic distribution.

Simply put:
It’s asinine to drain a major portion of the ecosystem’s growth budget to compensate for a hack that was prevented early and only allowed to persist due to clear negligence in monitoring and response. This is not the burden of Sonic governance to absorb.

For these reasons, I strongly reject this proposal.

7 Likes
10

I respectfully disagree with your reasoning.

The affected LPs in the stS/wS and wOS/wS pools were not taking speculative risks—

they were supporting Sonic’s core liquidity infrastructure.

These pools were essential for:

  • stS liquidity routing

  • Aave stS integration

  • LST confidence

  • on-chain capital efficiency

  • early TVL growth for the entire Sonic ecosystem

These LPs played a foundational role in Sonic’s early success, providing deep liquidity when it mattered most. Without them, the network would not have grown as fast as it did.

This wasn’t a case of “users chasing risky yield.”

It was a structural vulnerability at the DEX layer that no ordinary user could have foreseen or mitigated. Blaming LPs for participating in audited, widely-used Balancer V2 architecture sets the wrong precedent.

Most importantly:

Supporting impacted LPs is not “draining” the ecosystem — it’s reinforcing trust in Sonic.

If early supporters are abandoned after suffering losses in infrastructure that Sonic itself depended on, we risk long-term damage to network confidence, liquidity stability, and builder morale.

The proposed distribution:

  • uses already-allocated airdrop tokens, not new inflation

  • strengthens long-term liquidity through locked positions

  • aligns Sonic and Beets through burns and treasury commitments

  • provides real restitution without creating sell pressure

This is not charity — it is strategic community reinforcement.

I will be voting Approve, because a healthy ecosystem supports those who supported it first.

8 Likes
11

I will be voting yes on this proposal.

I was not directly impacted, but as a Sonic staker and validator, this will provide more value to the ecosystem than continuing on the airdrop path, which has done nothing but extract from the ecosystem.

This proposal strengthens core infrastructure that we rely on if we want to grow at a time where it’s desperately needed to maintain Aave program incentives. We lose that, we are toast.

Additionally, in $ terms, the network is quite likely to profit long term in this deal.

Labs already swept ~15 percent of affected LP. This gives a good way to return that, and more, without getting involved in messy recourse at a time where we are courting institutions stateside, and locking in real, USD revenue streams from fees and treasury commitment. We need the healthiest, strongest possible LST protocol for leveling up- this does that.

The only people who lose are mercenary airdrop farmers who simply extract. Redirecting the program funds to support this is an excellent move that fits the revamped sonic strategy.

9 Likes
12

This proposal is better than a grant, as SL will directly benefit materially via revenue commitments. Aave program, strong LST alignment are CRITICAL to growing the chain. It’s not an exaggeration to say that onchain metrics depend on StS more than any other project in Sonic. Locking in it’s future and the protocol that supports it is common sense.

I will be voting yes.

7 Likes
13

Strongly disagree with this.

1- Lots of assertions of insider dealing without evidence.

2- There is no precedent being set here. There were “airdrop funds” as part of a larger bucket to grow the network. The airdrop proved to be extractive. Redirecting these earmarked funds for the purposes of strengthening the biggest DeFi player in the ecosystem in a profitable manner is not socializing any loss.

3- Yes, but it’s not about the LPs from Sonic’s angle. It’s about ensuring we keep our biggest and best DeFi product and the things that it provides.

4- Contrary to weaking network level ROI, it measurably improves it.

Simply put - there are multiple ways to achieve growth. What is asinine is to abandon Beets at a time when it’s absolutely critical, ignore the guaranteed sweetners from Beets Dao, abandon our best LST when we need it most. The LPs being made whole is a side-effect and speaks to Beets’ care of their users. From a Sonic level it makes no sense not to do this with $s that have already been minted.

For these reasons, I strongly approve of this proposal and will be voting yes.

7 Likes
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I’d also add that independently of reinbursing LPs, this is a smart play for Sonic.

1- Provides multiple revenue streams that are certain to be a net USD positive for Labs if traction can be achieved

2- That traction relies on Beets’ being a strong LST and the programs that it enables.

Yes.

7 Likes
15

I strongly disagree with using airdrop budget as a retroactive bailout fund.

First, important context: this is a Beets-started discussion thread, not an official on chain vote and not a live governance proposal yet. Let’s not socially “approve” something before it even exists as a proper proposal with full disclosures.

Now the substance:

1- Airdrop funds are for ecosystem growth, not losses

Airdrop allocation is meant to onboard users, fund builders, incentivize new activity, and bootstrap liquidity forward looking. Reallocating 27M S to “make users whole” is not growth spending.

2- Horrible optics + precedent

If the chain uses community distribution budgets to compensate one exploited venue, you create a precedent:

  • every future exploit becomes a governance debate

  • every protocol will ask for cover

  • every user loss will be debated

3- Selective compensation is unfair by design

Not all hacks/exploits across DeFi are compensated and they shouldn’t be by default., especially by foundation’s community owned airdrop funds. Picking one means everyone else who took risk and got hit elsewhere is implicitly told: sorry, wrong venue.

4- No new inflation is not a free pass

Saying no new emissions doesn’t solve the core issue. it is still community owned capital being redirected from growth/ecosystem support to reimbursement. Infact, I might have thought about the proposal seriously, if the burden was more on beets and less on airdrop funds.

Beets has GEMs (they can allocate 100%), or they can allocate 40 to 50% of revenue and create an internal proposal within their own community to cover the losses, then ask the wider $S community for support. I would have certainly supported that.

5- Beets give backs don’t clearly match the magnitude

  • “Burn 10% of protocol revenue on Sonic for 2 years” is an unknown amount and may be far smaller than 27M S.

  • Why 10%? Why not 50% or maybe more (If Beets is serious about affected users)

  • 10% of treasury buys S is unspecified in timing/execution and still does not justify using airdrop funds as an insurance pool.

If those commitments are meaningful, Beets can implement them independently and/or use treasury/revenue to create an internal reimbursement program.

6- Proper ownership of responsibility

This incident came from a Balancer V2 Composable Stable Pool vulnerability that hit multiple ecosystems. Beets acknowledged the fork exposure.

That makes this fundamentally a DEX-layer / architecture dependency issue not an airdrop budget should cover it issue.

7- If the goal is restoring stS liquidity, fund it forward .

Do not reimburse backward. If Sonic/foundation plans to strengthen stS routing and rebuild depth, the best way is to have forward looking liquidity incentives open to the whole market, not a retroactive reimbursement to one set of addresses because one of the protocol within the ecosystem got exploited.

Until then: Reject. Airdrop funds are for growth, not bailouts.

4 Likes
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100% disagree.

The funds allocated to the Airdrop Campaign were minted to GROW the ecosystem and incentivize usership, not pay for a Balancer / Beets exploit.

Color of money matters here. If Beets had proposed pulling funds from another type if fund, okay, I would more seriously consider it but socializing losses & pulling funds from MINTED tokens meant to grow Sonic, No, I cannot support.

4 Likes
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Sonic Labs, if this goes through, is opening up a can of worms for future exploits.

Approving this means that EVERY protocol that gets exploited can seek reimbursement.

Does this mean that via Approval of this proposal and rejections of future proposals that Sonic Labs or Beets can be sued? I’d rather not go down this path and find out.

2 Likes
18

In order to grow you need to retain and prevent churn.

The airdrop funds have provided no growth and a decline in $S value from people dumping their allocation.

This proposal helps to retain Beets, it’s userbase and strengthen network liquidity. It’s a clear win-win.

5 Likes
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Is Balancer going to step in here and help? Why is the onus on Sonic Labs to pay for the Balancer exploit?

Retaining Beets vs growing the ecosystem are not 1:1. The S was minted to grow the ecosystem, not pay for exploits.

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Sonic Labs isn’t “paying for the exploit”. Sonic labs is locking in a USD denominated win if S is successful.

To be successful, Sonic needs Beets strong. It’s an investment, not a bailout.

5 Likes