CAKE Tokenomics Proposal 3.0: True Ownership, Simplified Governance and Sustainable Growth

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Our Vision: Flexibility, Sustainability and Long-Term Success

Our goal at PancakeSwap is to build a decentralized ecosystem that prioritizes flexibility, sustainability, and the long-term success of the CAKE community, liquidity providers, and PancakeSwap supporters.

We Believe in Deflationary Growth: Building on last year’s success—where we reduced the CAKE supply by 2.7% (the highest deflation rate among decentralized exchanges)—we are aiming higher. Over the next five years, we plan to reduce the CAKE supply by 20%, targeting an annual deflation rate of 4%. This is part of our commitment to ensuring CAKE becomes a deflationary asset while fostering steady and sustainable growth.

We Believe in Real Revenue, Real Impact: At PancakeSwap, we focus on driving real revenue and creating value for the community. Emissions are a shared responsibility, and we have demonstrated CAKE’s deflationary potential for 20 consecutive months. Moving forward, our focus is on scaling volume growth by optimizing liquidity incentives, boosting revenue per CAKE spent, and cutting unnecessary costs. Every decision we make revolves around the goal of creating real revenue and contributing to long-term success for the entire community.

We Believe in Community-Centered Growth: CAKE is built by and for its community—there are no VC funds or team allocations. True ownership belongs to everyone in the CAKE ecosystem, and we show this commitment by denominating our treasury in CAKE. All data related to CAKE volume and protocol activity is fully transparent and accessible on Dune, and we publish regular burn and mint reports to keep the community informed.

Key Highlights of the Tokenomics Proposal:

  • Deflationary Goal: We aim for a 4% annual deflation rate and target a 20% reduction in the CAKE supply by 2030.

  • Retirement of the veCAKE and Gauges Voting System: The veCAKE and Gauges Voting system will be phased out for a more straightforward and efficient emissions model.

  • Retirement of CAKE Staking: All staked CAKE will be unlocked immediately, giving users full access to their CAKE without penalties, regardless of the original staking period.

  • Retirement of Revenue Sharing: Fees previously allocated to revenue sharing through staking from the 0.01% and 0.05% v3 pools will be redirected to the CAKE burn.

  • Reducing Emissions: Total CAKE emissions per day will be cut from ~40,000 CAKE to 22,500 CAKE, helping to reduce the supply and support deflation.

This proposal aims to streamline the PancakeSwap ecosystem by optimizing CAKE efficiency, enhancing flexibility, and optimizing returns for liquidity providers, all while supporting sustainable growth.

Proposal to Reinvent PancakeSwap’s CAKE Tokenomics

PancakeSwap must work towards the best interest of CAKE holders and this proposal offers a path forward

When the veCAKE and Gauges Voting system launched, the goals were simple:

  • Lock CAKE for the long-term to drive additional benefits to CAKE lockers through bribe revenue
  • Bribe revenue is generated by protocols wishing to incentivize liquidity for their pools
  • veCAKE holders vote to receive the bribe, and CAKE emissions are allocated to trading pools depending on their voting share

However, community feedback has highlighted several concerns:

  • The tokenomics model is too complex, and the community desires a more straightforward system.
  • The benefits of veCAKE don’t justify the time, complexity, and risk involved.
  • The bribing system allocates rewards inefficiently, over-rewarding low-volume pools while high-volume pools receive fewer rewards.

What key issues have we learned from operating the veCAKE and Gauges Voting System?

  • Inefficient Capital Allocation (Over-Rewarding Low-Impact Pools): The veCAKE bribing system over-rewards low-volume and low-revenue generating pairs due to adverse selection. This results in a lower burn for the amount of CAKE emitted to sustain liquidity in these trading pools. For example, low-volume pools received a disproportionate share of rewards—highly bribed pools received over 40% of total emissions, whereas they contributed less than 2% of the CAKE burned.

  • The value returned to CAKE holders is offset by inflexible emissions: The fixed stream of CAKE emissions does not adapt quickly enough based on market conditions such as volume, CAKE price, and burns. This lack of flexibility means that even when lower emissions and higher deflation could be achieved, the current system doesn’t allow for adjustments promptly.

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Addressing the Issues: A More Efficient Emissions Model

To address these inefficiencies and improve the flexibility of the CAKE ecosystem, we propose the following changes:

  1. Retirement of the veCAKE and Gauges Voting System: We propose to retire the veCAKE and Gauges Voting System in favor of a more straightforward and efficient emissions model. This will simplify the process and make it more adaptable to the ecosystem’s needs.

  2. Retirement of CAKE Staking: All staked CAKE will be unlocked immediately, giving users full access to their CAKE without penalties, regardless of the original staking period.

  3. Retirement of Revenue Sharing: Fees previously allocated to revenue sharing from the 0.01% and 0.05% pools will be redirected to the CAKE burn.

  4. Reducing Emissions: Total CAKE emissions will be cut from ~40,000 CAKE to 22,500 CAKE, helping to reduce the supply and support deflation.

  5. Direct Emissions Management: Instead of relying on the veCAKE system, the PancakeSwap team will directly manage emissions. This new approach will allocate rewards based on real-time data and prioritize high-volume liquidity pools, improving liquidity efficiency by 30-40% and contributing to a more sustainable ecosystem.

Important Note:

  • The majority of APRs on farms will not be affected. Almost all LPs will continue to earn similar levels of return as they would have prior to these changes. These proposed changes impact less than 40 pools out of several hundred.

What Will Change if the Proposal is Passed and Implemented?

  1. Unlocking all veCAKE and retirement of the CAKE Staking Model:

    • All veCAKE will be unlocked and redeemable for CAKE on a 1:1 basis via the PancakeSwap interface shortly after if this proposal passes. The redemption page will remain available for 6 months, giving users sufficient time to exchange their veCAKE for CAKE.

    • After this 6-month period users can still withdraw their veCAKE through the legacy page or directly from the veCAKE contract.

    • For veCAKE linked to veCAKE managers (e.g., CakePie, StakeDAO, Astherus), users must wait for the partner veCAKE managers to implement a withdrawal process. We will whitelist addresses associated with those partners, but please note that we cannot directly process partner token withdrawals.

    • The current CAKE staking model, which includes staking periods ranging from 1 week to 4 years, will be retired. Once the proposal is passed and implemented, all staked CAKE will be unlocked immediately, giving users full access to their CAKE without penalties, regardless of the original staking period. Users can unlock their CAKE via the CAKE Staking interface from shortly after if this proposal passes. The CAKE unstaking page will remain accessible for 6 months, giving users ample time to unlock their CAKE.

Important Note:

  • Rewards will continue to accrue until one epoch after this proposal passes. After this epoch, no further reward will be accumulated from the veCAKE pool APR and bribe APR from veCAKE holdings. Any rewards accrued before this epoch will remain unaffected, but no additional rewards will be generated beyond that date.

  • Farm yield boosting will also be retired from position managers, syrup pools, and farming.

  • This shift aligns with our vision of a decentralized financial system where users can participate and exit freely, without the burden of long-term commitments. By removing staking restrictions, CAKE will become more flexible, empowering users to use them for governance, liquidity provision, or other activities within the ecosystem.

  1. Retirement of the Revenue Sharing Model

    • The CAKE revenue-sharing model will be discontinued. The 5% of LP fees previously allocated to revenue sharing (from the 0.01% and 0.05% pools) will now be directed toward the burn mechanism.

    • This will increase the burn rate for these pools from 10% to 15%. Since the 0.01% and 0.05% pools on CAKE v3 account for a significant portion of the overall trading volume, this change will accelerate CAKE deflation.

Important Note:

  • Revenue Sharing rewards will only continue to accrue until one epoch after this proposal passes. After this date, no further rewards will be accumulated from the revenue-sharing pool from CAKE staking. Any rewards accrued before this date will remain unaffected, but no additional rewards will be generated beyond that date.

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  1. Reducing Daily Emissions to Drive Deflation:

    • We propose reducing daily emissions to further drive deflation and optimize the CAKE ecosystem. Specifically, we plan to decrease total emissions from ~40,000 CAKE to ~22,250 CAKE per day, cutting annual emissions from 14.6 million to 8.1 million CAKE.

    • This reduction will result in a more efficient burn mechanism, permanently removing CAKE from circulation. This will contribute to an annual deflation rate of 4% and reduce the total CAKE supply by 20% over the next five years.

Implementation Plan:

  • The daily emissions to farms are approximately 29,000 CAKE or 10.5 million CAKE per year. We expect a more targeted allocation of emissions by phasing out the current bribing system and transitioning direct emissions to high-volume, high-growth liquidity pools. These emissions will be based on real-time market data, ensuring liquidity is directed to the most productive pools

  • Phase 1: Immediately after the launch of the veCAKE redemption page, daily farm emissions will be reduced from ~29,000 CAKE to ~20,000 CAKE and the Ecosystem Growth fund will be reduced by 50% from ~6,500 CAKE to 3,250 CAKE, and these savings will be directed to the burn.

  • Phase 2: Over the following 4 weeks, daily farm emissions will be further decreased from ~20,000 CAKE to ~14,500 CAKE, representing a 50% total reduction. These changes translate to ~6.5 million CAKE per year that will be burned, permanently removing these CAKE from the market. Again, for the majority of LPs, their current APRs will not be impacted.

  • Phase 3: The above represents a 17,750 CAKE per day reduction (~44% of emissions). After this, the team will further streamline emissions and focus on high-value liquidity pools that help in reducing the number of CAKE entering the market while enhancing the overall burn rate. This will support the long-term sustainability of the CAKE ecosystem and create more value for our community.

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Simplified CAKE Utility Model

As a result of the proposed changes, we envision the following outcomes that will drive the evolution of CAKE’s utility and the value proposition for our community:

1. IFO Participation Made Easier:
Previously, users had to stake CAKE on PancakeSwap to participate in Initial Farm Offerings (IFOs). Going forward, we will remove this requirement. After the success of five TGE events with Binance Wallet, we aim to open up IFO participation to anyone with CAKE in their non-custodial wallet. There will be no need to lock them up beforehand—simply use your CAKE to subscribe to IFOs. This change reduces the barrier to entry and encourages more users to join the CAKE ecosystem.

2. TGE Event Participation:
Following the success of co-hosting five TGE events with Binance Wallet, CAKE will soon be usable to subscribe to Token Generation Events (TGEs) hosted by Binance Wallet and PancakeSwap. Similar to IFOs, there will be no need to stake CAKE in advance—users will simply commit the amount of CAKE they want to participate with, and any unused CAKE will be refunded after the event.

3. Flexible Voting Proposals:
We propose introducing a new voting system where CAKE holders only need to commit CAKE temporarily during the voting period to submit their votes. This eliminates long-term staking commitments, offering more flexibility and greater control over governance decisions.

A True DeFi Ecosystem for All

This proposal reshapes the CAKE ecosystem to be more efficient, flexible, and optimizes for long-term success. By reducing the supply of CAKE, streamlining emissions, eliminating the CAKE staking model, and rewarding liquidity providers more efficiently, we are laying the foundation for a sustainable future for all stakeholders. These changes are designed to create a more inclusive, decentralized platform that stays true to DeFi’s core values—empowering users and strengthening the CAKE community for years.

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This is the Kitchen’s proposal for an update to CAKE’s tokenomics. For all questions and feedback, please post them in the comments below.

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(Reserved for future use)

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Hey,

I strongly advise against that proposal.

We see here that the main issue is Magpie canibalising most rewards, through bribes with their own printed out of thin air token, that is only backed by voting power seized from CAKE holders.

An easy fix would be to cap the mCAKE, mPENDLE, mBTC, msweth, mstETH, MGP, and CKP pairs to 0.25% of inflation and your capital allocation will be way more efficient.

These pairs don’t bring much value to Pancake as they are pretty much all fully depegged by design, and therefore, users are trapped and can’t trade in or out.

These is all something that I have warned you about when you launched veCAKE, as I have seen it happen everytime in the past on Curve, Balancer, and Frax. Two-token model (mCAKE + CKP) is detrimental for the underlying protocol, but that doesn’t mean that the veCAKE model is bad. It just means you need to control the convex fork, and PancakeSwap has the means to do that through gauge emission caps.

If you deprecate veCAKE, you will:

  1. Destroy the trust of protocols building on top of PancakeSwap
  2. Loose a lot of coincentives from projects engaging in bribing
  3. Stop being the go to place for new protocols launching their governance token (why going to Pancake when you can go to Uniswap if you can’t even bribe to get some co-incentives towards your pool?)
  4. Loose an important revenue stream for CAKE holders
  5. Loose a mechanism that favors long term alignment of holders and reduces the sell pressure in highly volatile times.

There is a problem in the way rewards are currently distributed, but the solution is not to deprecate the very good veCAKE model (one of the best veModel I see in the market right now). Just stop giving 25% of emissions to Magpie.

A solution could be to do burn-based bribes with revenue sharing, basically the same idea as the Pendle model, which is working extremely well: pools that generate fees get the emissions. That would be a great solution, as it doesn’t prevent other protocols from depositing bribes, but they will have to compete with pools generating fees, and bribes will be much more expensive.

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An important update!

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I think that 's a very good idea . Hon Toan Dong

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If there will be no Cake staking anymore, hundreds of millions of unlocked cakes will go to syrup pools and make those interest rates nearly zero as their interests are still so low right now..how would you deal with that?

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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
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I agree the proposal.

For me, there is only one penalty: Loss of trust. Everything else is extremely good. I have been a Cake holder since 2020, and I have already lost trust in your Pool once, when I was staking for 1 year and suddenly the rewards were lowered - without me having the chance to unlock them. Now this will happen again, but the solution found was to unlock everything immediately. Ok, this helps, especially with the De-peg that exists today between X-coins, it will not be all bad for the X-cake holder.

Now, talking about the points of the proposal, it is simply wonderful. People forget that all “Burns” are actually coins that the protocol buys daily from the market. In other words, we have a buyer of last resort, every day. Every one! And on the other side, the person who received the rewards was a seller of last resort, and so we had a selling force contrasting with a buying force. Let’s eliminate part of the selling force!

Now, let’s do the math:

  • According to Chef’s data, we would have an additional 7 million Cake burned annually. Today, we have about 60 million Cake blocked. Essentially, the entire Pancake holder community is spending 7 million Cake to keep 60 million Cake blocked, since the real cost of maintaining the platform was demonstrated without the need for that amount. 11.66% cost. Is it worth it? Doesn’t it make more sense to use that amount for Burn, and in 9 years, we will have that amount of Cake permanently out of circulation?

I believe that the Vecake model could be a winner if, and only if, the amount of Cake blocked was similar to what we had in the previous Pool. The truth is that it is MUCH, MUCH, MUCH lower. We only have 15% blocked. And we are paying a lot to keep them there.

All the talk about “building” on top of the platform is bullshit. I didn’t see anything being built, they are there for profit and money, and they will stay there because of that. No construction.

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This is really a very bad proposal. Why not take out part of the income from the agreement to buy back and destroy the cake? Or keep the vecake pool and distribute part of the agreement income directly to vecake.

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There will still be utility for $CAKE. And if all the efforts to buyback and burn pays off then we should see an increase in $CAKE price.

Numbas going up is the best utility in this industry

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I can’t describe how disappointed I am…staked since 2022. Lost 90% of my value. Reinvested and dca after veCake and now this…

PLEASE DON’T USE the phrase “long term” again. You do not have the right to use it after so much experiments with our money. Your game your rules but please show some respect to some people who risked their savings to your project

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So what exactly is this Tokenomics 3.0?

From what I read in this proposal, 95% of the content focuses on removing the old tokenomics model. Meanwhile, the part about the new tokenomics is either vaguely mentioned as “easier and more efficient” or not mentioned at all — with absolutely no concrete or detailed plan provided.

Isn’t this like wanting to tear down the old house immediately while having no clear design or preparation for the new one?

The only specific use case mentioned for the new tokenomics is adopting the Binance Wallet model to lower the barrier for IFO participation. But the real question is: why would users want to join these IFOs in the first place? Can PancakeSwap really source high-quality IFO projects comparable to Binance?

Where is the confidence coming from — especially when even previous IFOs (with strict lock-up conditions) still resulted in significant losses for participants just days after TGE? Now with fewer restrictions, is it reasonable to believe that users will suddenly gain profits and be eager to join?

Lastly, from an investor’s perspective, how can anyone feel confident in accompanying the project long-term, when every year there seems to be a completely different tokenomics model — not just improvements or optimizations, but a total reset?

And in this proposal, even the new direction feels extremely vague and lacks a convincing execution plan.

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We vecake holders have waiting a long time for the Old pool to go back into circulation. Now we will have to wait another 6 months for the Vecake pool to be added back into circulation. equals lower price.

The fact this proposal comes after over 20 million cake is staked for 4 years. Which if passed these cake get to withdraw immediately is showing signs this is manipulated.

Also changing the foundation of cake emissions and gauges after 3rd parties have built their projects around and invested millions in cake staked. Is a big red flag to new Developers who may consider partnership with Cake. This is bad move in my opinion.
It will do a lot of harm to the credibility of Pancakeswap.

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I strongly disagree with the proposal. Removing cake staking and completely trying to discard subdao’s will not contribute to $CAKE ecosystem.

In addition to this, yesterday 25M $CAKE were sent from one wallet to multiple wallets are staked. It seems very suspicious that this huge amount is 4-year staked and today we are seeing this proposal.

Vote NO for the sake of the $CAKE.

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Lets go. Nice proposal.

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This is the shadyiest part for sure… So much for decentralisation and “community”…

Perhaps this new mysterious voter can commit to not vote and let the community decide?

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Exactly if these recently locked cake happen to vote in favour of the proposal and get back the Cake which they instantly locked for 4years. Then this is clearly manipulated. It will discourage me from dealing with Pancakeswap or any of their IFO in future.

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I strongly oppose the proposal.

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