Decision Proposal for CAKE Tokenomics v2.5

After careful consideration and dialogue on the community’s feedback from the discussion proposal, we have revised the voting options for this decision proposal.

We are also really grateful to the community for the feedback, and have addressed some of the common questions and concerns here.

Context and Background

Last week, we posted a discussion proposal on transforming CAKE to a tokenomics model focusing on:

• low staking inflation;
• real yield from PancakeSwap’s protocol revenues; and
• product benefits favoring longer-term CAKE stakers.

Based on the community feedback, the clear points of agreement were:

• Current inflation rates are unsustainable for CAKE over the long term, and reductions are required for the long-term health of PancakeSwap
• Protocol revenue sharing is more sustainable over the long term and is aligned with PancakeSwap’s growth trajectory

The major concerns raised were:

• Recent staking participants are the most affected by reductions, even though they too recognize the benefits of reduced CAKE inflation
• 1 CAKE/block and below immediately on the Syrup Pool might be too sudden a change
• CAKE Syrup Pool should not have APRs such that PancakeSwap is disadvantaged against other DEXs

For reference, the staking rates of other dexes:

Data Extracted on 25 April 2023, from various DEXs

Voting Options

Based on the voting data, there were 2 clear favorite options, and the splits are:

We believe the community would benefit from choosing a solution that addresses the objectives and concerns on both sides. As such, we propose two voting options based on the following principles:

• A moderate amount of immediate reduction to lower overall inflation
• A staged reduction of future CAKE Syrup Pool emissions with clear forward guidance to present and future stakers on emissions and staking APR
• A Syrup Pool APR that is still attractive relative to other DEXs at the end of the reduction period

Based on the above, we present the options to the community for a final decision vote:

Option 1️⃣ An aggressive reduction:

• Adjust CAKE Syrup Pool emissions from 6.65 CAKE/block to 3 CAKE/block immediately
• Thereafter, reducing 0.5 CAKE/block monthly for 5 months
• CAKE Syrup Pool emission is reduced to 0.35 CAKE/block (~2% APR) at month 6

Option 2️⃣ A gradual reduction:

• Adjust CAKE Syrup Pool emissions from 6.65 CAKE/block to 4.5 CAKE/block immediately
• Thereafter, reducing 0.5 CAKE/block monthly for 8 months
• CAKE Syrup Pool emission is reduced to 0.35 CAKE/block (~2% APR) at month 9.

Option 3️⃣: No to ultrasound CAKE, I do not agree with either option 1 or option 2.

While our preference is for Option 1, we understand the community’s concern and feedback for a more gradual and slow adjustment and present Option 2 as an alternative.

For clarity, if Option 1 or Option 2 are successful, the other benefits of CAKE staking (as covered in the discussion proposal) will still be implemented – such as revenue sharing, increased CAKE weightage towards longer-term CAKE stakers, and increased CAKE products benefits.

For there to be a successful vote, there needs to be >50% support for either option 1 or option 2.

To further elaborate, both options have common aims:

• 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, which is significantly above the overall CAKE inflation rate for a prolonged period of time.
• Enable a competitive staking APR relative to other leading DEXs at the end of reduction.
• Enable existing and future stakers during the gradual reduction to earn all of the remaining high-inflation CAKE rewards in the chosen period.

The primary differences between the two options are:

• the degree of the initial cut to Syrup Pool emissions, and
• the duration of the managed reduction in Syrup Pool emissions.

For other questions asked by the wider community, see the FAQ here.

Emissions Scenario Analysis

Based on the voting options around the Syrup Pool emissions reduction, we have mapped out their impact on our journey to ultrasound CAKE, Syrup Pool APRs, and CAKE Inflation %:

Implementation

Syrup Pool CAKE/block emission reductions will be implemented based on the option chosen.

We estimate that the technical implementation around revenue sharing and increased CAKE weightage towards longer-term CAKE stakers will take place in end June, given Q2 roadmap demands. Product benefits to CAKE stakers and implementation will be announced based on product timelines.

⚠️Please note⚠️

Either Option 1 or Option 2 must have a majority of 50%+ at the end snapshot in order to win the vote and be executed.