Why do I think this is a mistake?
All protocols that truly create value for users have a staking and blocking system.
The idea is simple. Holders who have been committed to the protocol for a longer period of time receive more and better incentives.
All of this can be achieved by burning. The transfer of value will now be exclusively through burning. There are advantages to this method. But today, with the bribes, the APR is around 20%.
With the current proposal, the APR will be indirect through burning and only 4%.
And there are also a lot of problems:
1 - Killing any type of stake is killing an incentive for holding. Will burning at the level presented be enough to raise the price, combat selling pressure and ensure that it is an incentive for holding? It is a difficult and risky decision. There are several types of users, including those who like to receive income. Will they leave?
2 - You will kill the protocols that accumulate cake and build at the top of the PCs. This is completely absurd. There is a loss of credibility for PancakeSwap given that several protocols such as Cakepie, StakeDao, Astherus. If this was built with them, ok. If it wasn’t, it’s a big problem. How certain are we that any protocol will have to partner and build on top of PancakeSwap from now on? Remember that hooks and v4 give us modularity so that more people can build on top.
3 - The problem with bribes and inefficiency has to do with Pancakeswap not being involved in getting incentives for bribes. If Pancakeswap organizes the gauge system and goes to the market looking for more bribes for the main tokens and pairs, I believe the problem of inefficiency will decrease.
The main metric should not be bribes/burn contribution. Bribes are rewarding for cake allocation. Even pools with high volume need to be incentivized. And apart from the central pools of the largest tokens like BNB, USDT, USDC, ETH, BTC, all the others contribute little to the burn. But these pools already have huge liquidity too. The question therefore is to better balance the bribes and go after incentives for the pools that generate a lot of burn. For example, can’t Binance incentivize the BNB/USDT pool?
It doesn’t make sense to allocate more cake to the main pools even though they are responsible for more burns, because we don’t have a liquidity problem, the prices are already great and beat the competitors in the main pools that generate more burns.
4 - Now the allocation to the farms is all in the hands of the kitchen. In fact, the holders are left with nothing. There is no income, there is no power to allocate to the farms, there is nothing. It is a shift towards “all power for the kitchen”, which will allocate the cake to the farms according to what the kitchen considers best.
What advantage would the holders have from the cake allocations in certain farms besides the hope of having a large volume? This can also lead to wasted cake. This was also an initial problem years ago that led to the implementation of vecake.
5 - You took away a great power from the cake, which is the vote weighted by the holding time. You are killing governance and giving power to whales. With voting weighted by holding time, a whale that locks for a short time may have fewer votes than a sardine that holds for a long time.
last question: What do you think will happen when all the cake is unlocked? There will probably be a huge pressure to sell immediately.
Finally, a burn-only system also has challenges, for example:
The more the price of cake rises, the less cake the same amount of volume will be able to burn. Therefore, it will need to be compensated by reducing emissions. If this is not well managed, we will have problems with a targe of burn.
What is the core problem?
this proposal favors whale newcomers over long term holders!
Solutions:
- Implement more flexibility in veCAKE, for example: with the possibility of exiting with penalties that would go to burning
- Simplify everything with a page dedicated to vecake and the best gauge, a page to attract bribes.
- That the kitchen also takes control of vecake, organize ir better and has a plan to attract bribes and encourage votes