Beets Budget 4 (Q4 2025)

Introduction

Since its launch on Sonic, Beets has adopted a quarterly budget system designed to provide governance-controlled flexibility, allowing the protocol to adapt emissions to changing market conditions while safeguarding the token supply and community interests. Under this system, the Music Directors present a BEETS budget for DAO approval every three months, covering the upcoming quarter. Each budget outlines the number of BEETS to be minted and their allocation within the ecosystem. It also specifies the distribution of protocol revenue for that quarter.

The third quarterly budget (July–September 2025) will conclude at the end of September. The 2025 Q4 Budget will cover the period from October through December. We first introduce an overview of the Q3 Budget (excluding September data) and then provide the proposal for the Q4 Budget.

Overview of the Q3 Budget

Total budget for Q3 was 7,200,000 BEETS tokens:

The table below shows the total Q3 allocations alongside the values as of the end of August:

By the end of August, 4,521,000 BEETS tokens had been used in total from the Q2 Budget. The remaining Budget is expected to be spent by the end of September as follows:

1. 840,000 BEETS - BEETS distributed based on the gauge vote results
2. ~1,320,000 BEETS - BEETS distributed based on the MD Discretion

The Music Directors planned their distribution with a reserve of tokens to cover potential specific use cases. If these tokens are not utilized, the Q3 budget will likely conclude with a surplus of approximately 500,000 BEETS.

Protocol revenue distributions have followed the allocations outlined in the Q3 Budget. The table below details the revenue sources and their respective allocations:

*(Treasury - Towards DAO treasury; maBEETS - Towards BEETS buybacks to be used as protocol bounties on Sonic gauges votes; BEETS BB - Towards BEETS buybacks to be used in the next budget; Other - Extra incentives and revenue share with partners) With the launch of v3 on Optimism we have different fee structures for v2 and v3 pools and thus the total Optimism allocation percentages are an approximation.

By the end of August, a total of 4,288,226 BEETS had been bought back from the open market. Of this amount, 2,839,939 BEETS were used as protocol bounties for Sonic gauge votes, while 1,448,287 BEETS were reserved for the next quarterly budget:

Extrapolating from this data, we estimate that approximately 2,100,000 BEETS will be available for the Q4 budget from Q3 buybacks.

Proposal for the 2025 Q4 Budget (October - December)

### 1. BEETS to be Minted/Repurposed for the Upcoming Quarter

We propose setting the total Q4 budget at 8,000,000 BEETS. Based on current Q3 budget data, we estimate that 2,100,000 BEETS will be carried over from Q3 buybacks, with an expected surplus of 500,000 BEETS. This means approximately 5,400,000 BEETS will need to be minted for Q3, with the final amount confirmed after September fees have been processed. For Q3, we minted 5,454,283 BEETS; if projections hold, the minted amount for Q4 would be approximately the same. For context, the annual maximum inflation of 10% allows an average quarterly minting of approximately 5.9M BEETS.

2. BEETS Allocation for the Upcoming Quarter

The Q4 budget will cover a total of 14 weekly deposits. We propose distributing 2,940,000 BEETS via gauge votes, maintaining 420,000 BEETS per vote and an average weekly distribution of 210,000 BEETS.

In the Q3 budget, we stopped directly incentivizing the maBEETS pool. Based on user feedback, we understand that users miss the opportunity to claim these rewards; therefore, we propose reinstating these incentives. We suggest allocating 460,000 BEETS for this purpose, which would provide incentives of 5,000 BEETS per day or 35,000 BEETS per week.

We propose allocating 4,600,000 BEETS under MD Discretion. With one additional week in the Q4 budget, this would effectively result in a slightly smaller weekly allocation. For estimation purposes, this would allow the Music Directors to allocate 300,000 BEETS per week, with a 400,000 BEETS reserve.

Overall, MD Discretion aims to use BEETS to: (a) Add extra incentives to pools deemed important; (b) Bootstrap new promising pools; (c) Incentivize the usage of stS within the Sonic ecosystem; (d) Increase the amount of BEETS distributed through gauge votes.

3. Protocol Revenue Allocation (Option A)

*Since Optimism deployment has various fee splits for different pool types, then the values are an approximation

We propose two different protocol revenue allocation options for discussion, with the difference in Sonic DEX Fees allocation.

Sonic DEX Fees: Allocation will remain unchanged, with 30% going to the DAO treasury and 70% used for BEETS buybacks. These BEETS will be applied to gauge votes as protocol bounties, ensuring the flywheel effect of high-earning pools is maintained.

Fantom DEX Fees: 100% will be used for BEETS buybacks, to be allocated in the 2026 Q1 budget.

Optimism DEX Fees: Values have been slightly adjusted based on the current fee structure. Approximately 60% of fees will be recycled as voting incentives, with the remainder split equally between BEETS and Balancer.

stS Fees: Previously, we allocated 20% of stS revenue to incentivize stS usage within the Sonic ecosystem. In Q3, the Music Directors have not identified a suitable use case, resulting in approximately 45.7k stS set aside so far, with an expected total of ~70k stS by the end of Q3. We propose stopping the collection of additional incentives and using it for BEETS buybacks. If a suitable opportunity arises during Q4, the rewards collected in Q3 can still be used.

Sonic Validator and Sonic FeeM Fees: All revenue will be used for BEETS buybacks for the 2026 Q1 budget.

3. Protocol Revenue Allocation (Option B)

Option B adjusts the distribution for Sonic DEX fees only (compared to Option A).

Beets gauge votes were originally introduced to give users and external projects the ability to reward BEETS holders for voting on their pools. However, throughout most of 2025, protocol bounties from the Beets protocol have dominated the market, driving vote bounty efficiency below 1 on their own.

Under Option B, protocol bounties would be limited at 50-90% of the BEETS distributed through gauge voting (for a 420,000 BEETS round, this would be 210,000-378,000 BEETS, still allocated proportionally based on fees earned). Any remaining BEETS would be redirected to the Q1 2026 budget.

Without further adjustments, this would likely reduce the total value claimable by maBEETS holders. However, the trade-off would be lower dilution, since fewer BEETS would be minted in the following quarter. Alternatively, the surplus could be used to increase direct maBEETS rewards in the next budget cycle.

To ease the transition, under Option B we also propose increasing direct maBEETS incentives in the 2025 Q4 Budget from the planned 5,000 BEETS per day to 10,000 BEETS per day. This adjustment would require minting an additional 460,000 BEETS, with the split as follows: