BIP-112: Decision on Further LP Loss Compensation Following the stS/S Exploit

Summary

This proposal asks Beets DAO to decide whether it should pursue any further compensation for liquidity providers affected by the stS/S exploit, beyond the 5.8m S already distributed by Sonic Labs.

If approved, Beets DAO affirms that LP recovery remains an open objective and commits to continuing governance discussions and proposals that may allocate Beets-controlled resources toward compensation.

If rejected, Beets DAO will consider the stS/S recovery process concluded from its perspective, and no further proposals to compensate affected LPs using Beets resources will be advanced.

Motivation

The stS/S exploit resulted in material losses for a group of long-term liquidity providers who participated in good faith in core Beets infrastructure. While Beets is a non-custodial protocol and does not provide insurance or guaranteed coverage, the DAO’s response carries important implications for LP trust, ecosystem credibility, and long-term liquidity alignment on Sonic.

Since the exploit, Beets contributors have spent significant time evaluating and advancing concrete recovery proposals. While these initiatives prompted meaningful discussion, they did not result in an approved or actionable recovery framework, leaving the DAO without a clear path on whether to pursue compensation beyond what has already been provided externally.

Before investing further contributor time, governance bandwidth, or technical effort into designing new recovery mechanisms, the DAO must first answer the fundamental question of intent: should Beets DAO do more, or stop here?

This BIP is intended to resolve that question clearly and conclusively.

Specification

This proposal does not implement a recovery mechanism. It establishes governance intent only.

If Approved If this BIP is approved:

• Beets DAO affirms that pursuing further recovery for affected stS/S LPs is a valid objective.
• The DAO authorizes continued discussion and the submission of future BIPs that may propose specific recovery mechanisms, funding sources, and implementation details.
• Any subsequent proposals remain subject to separate governance votes. Approval of this BIP does not imply guaranteed recovery, fixed timelines, or predefined funding levels.

If Rejected If this BIP is rejected:

• Beets DAO will consider the stS/S recovery process concluded from its perspective.
• No further BIPs proposing compensation for stS/S LP losses using Beets-controlled resources will be brought forward.
• The 5.8m S already distributed by Sonic Labs will constitute the full and final recovery related to this incident.

Impacts

Treasury and Revenue

• Approval has no immediate financial impact. Any future allocation of Beets resources would require separate governance approval.
• Rejection ensures no further Beets resources are committed to stS/S recovery.

Governance

• Approval enables continued recovery-related governance activity.
• Rejection explicitly closes the topic, reducing future governance load and ambiguity.

LPs and Community

• Approval signals willingness to continue exploring recovery paths, without guaranteeing outcomes.
• Rejection provides finality and clarity, but no upside beyond the already distributed 5.8m S.

Risks

• Approval may prolong a sensitive and potentially divisive governance topic, with no guarantee that consensus on implementation will be reached.
• Rejection may negatively affect LP confidence and perceptions of long-term alignment, despite the lack of any formal obligation.

This proposal intentionally avoids specifying mechanisms or amounts, which may be unsatisfying to voters seeking concrete solutions upfront. However, that ambiguity is inherent to the decision being asked.