PancakeSwap’s CAKE Tokenomics v2.5 Decision Proposal Approved with Surprising Results

By 0xK2 On Apr 29, 2023

PancakeSwap, a decentralized exchange platform running on BNB Chain, has passed the proposal for version 2.5 of its tokenomics model. The proposal is aimed at transforming CAKE, PancakeSwap’s native token, by lowering staking inflation and providing real yield from PancakeSwap’s protocol revenues.

The new tokenomics model is expected to favor longer-term CAKE stakers. The proposal underwent careful consideration and dialogue on the community’s feedback, which resulted in two voting options that addressed the objectives and concerns of both sides.

🗳️ Reminder to vote for the CAKE Tokenomics v2.5 Decision Proposal

👀This proposal offers benefits for long-term CAKE stakers, low staking inflation, and real yield.

💡 Before casting your vote, we recommed you to read our AMA recaphttps://t.co/eSEFg8kKWd

👉 To participate… pic.twitter.com/zkAVAp07Hn

— PancakeSwap🥞Ev3ryone’s Favourite D3X (@PancakeSwap) April 27, 2023

The first option proposed an aggressive reduction, which would adjust CAKE Syrup Pool emissions from 6.65 CAKE/block to 3 CAKE/block immediately. Thereafter, it would reduce 0.5 CAKE/block monthly for five months, reducing the CAKE Syrup Pool emission to 0.35 CAKE/block (~2% APR) at month 6.

The second option proposed a more gradual reduction, which would adjust CAKE Syrup Pool emissions from 6.65 CAKE/block to 4.5 CAKE/block immediately. Thereafter, it would reduce 0.5 CAKE/block monthly for eight months, reducing the CAKE Syrup Pool emission to 0.35 CAKE/block (~2% APR) at month 9. For either option to succeed, there needs to be over 50% support from the community.

According to the proposal, current inflation rates for CAKE are unsustainable for PancakeSwap’s long-term health, and reductions are required. While protocol revenue sharing is more sustainable over the long term and is aligned with PancakeSwap’s growth trajectory, some members of the community were concerned about the effect of the reductions on recent staking participants. PancakeSwap addressed these concerns by proposing a staged reduction of future CAKE Syrup Pool emissions with clear forward guidance to present and future stakers on emissions and staking APR.

PancakeSwap also presented a comparative analysis of the staking rates of other dexes, such as Uniswap, Curve Finance, Balancer, TraderJoe, QuickSwap, and Orca. The analysis showed that the proposed terminal CAKE Syrup Pool APR would be around 2%, which is still attractive relative to other DEXs at the end of the reduction period.

The implementation of the new tokenomics model will entail the reduction of Syrup Pool CAKE/block emissions. The reductions will be made in a managed manner, either aggressively or gradually, depending on the option chosen. The goal is to adopt a gradual approach to ultrasound CAKE with an initial decrease in CAKE Syrup Pool emissions, provide certainty on the path to ultrasound CAKE to CAKE holders and Syrup Pool stakers, enable current long-term stakers to earn a relatively high rate from Syrup Pool, and enable existing and future stakers during the gradual reduction to earn all of the remaining high-inflation CAKE rewards in the chosen period.

In conclusion, the passing of the proposal for version 2.5 of PancakeSwap’s tokenomics model is a significant development for the decentralized exchange platform. It demonstrates PancakeSwap’s commitment to the long-term health of its platform and its responsiveness to the concerns and feedback of its community. The proposed changes are expected to provide real yield from PancakeSwap’s protocol revenues and to favor longer-term CAKE stakers. It will be interesting to see how the PancakeSwap community responds to the options presented and how the new tokenomics model will impact the platform’s growth trajectory.

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