Discussion of Proposal to Retain Stablecoin Fees From Stablecoin Pools

Governance Tokenomics
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Background

Under PancakeSwap’s current revenue flow, protocol fees generated from trading activities across the platform are partially accrued to the Treasury as protocol revenue. Today, all Treasury-bound fees, regardless of their source, are first converted into CAKE.

When the protocol needs to cover operating expenses such as Chefs’ salaries or external service provider fees (typically denominated in USD), the Treasury must then sell CAKE back into stablecoins to meet these obligations.

This workflow introduces two key inefficiencies:

  1. CAKE price volatility exposes the Treasury to unnecessary market risk when converting assets to meet predictable USD-denominated expenses.

  2. Lack of stablecoin reserves limits the protocol’s ability to discretionally buy back CAKE during favorable market conditions.

Problem Statement

Converting all protocol revenue into CAKE and later selling a portion back into stablecoins creates:

  • Operational friction
  • Exposure to short-term price volatility
  • Reduced flexibility in Treasury management

This is especially inefficient for fees that are already generated in stablecoins, as it introduces an unnecessary round-trip conversion (stable → CAKE → stable).

Proposal Overview

The Kitchen proposes that all Treasury-bound protocol fees arising from major stablecoin pools on PancakeSwap be retained in stablecoins, instead of being converted into CAKE.

This change would apply across all AMM implementations, including v2, v3, StableSwap, and Infinity. Based on rough estimates, fees from these stablecoin pools accounted for approximately 29% of total Treasury revenue over the past year.

Rationale

This proposal aims to:

  • Improve Treasury operational efficiency
  • Reduce exposure to CAKE price volatility for routine expenses
  • Establish a stablecoin reserve for protocol operations
  • Enable discretionary CAKE buybacks when market conditions are favorable

Importantly, this proposal does not change the economic intent of CAKE buybacks, nor does it introduce sustained sell pressure on CAKE.

Since a portion of CAKE acquired by the Treasury must eventually be sold to fund USD-denominated expenses, retaining stablecoin fees upfront has no material net impact on CAKE buy or sell pressure over time. It simply removes unnecessary conversions and gives the protocol more flexibility in execution.

Adjustment Details

With the above in mind, we propose the following adjustments to Treasury fee handling:

  • Current Practice:
    All protocol fees are converted into CAKE before accruing to Treasury

  • Proposed Practice:
    Treasury-bound protocol fees generated from major stablecoin pools are retained in stablecoins, while fees from non-stablecoin pools continue to be converted into CAKE. For a start, this will only include stablecoin pools consisting of any two of the following tokens: USDT, USDC, USD1, and U. This may be expanded to other major stablecoins that arise in the future

  • Scope:
    Applies to PancakeSwap v2, v3, StableSwap, and Infinity

  • Estimated Impact:
    ~29% of annual Treasury revenue would remain in stablecoins, based on historical data

Implementation Steps

  • Update Treasury fee routing logic to bypass CAKE conversion for stablecoin pool fees
  • Maintain existing CAKE conversion behavior for non-stablecoin pools

Final Notes

This proposal is an administrative and Treasury management improvement, not a change in PancakeSwap’s long-term tokenomics direction. It strengthens the protocol’s financial resilience while preserving flexibility around CAKE buybacks and emissions.

Please leave your comments on the proposal below.

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Proposal: Treasury Burn Buffer (TBB)

An Anti-Cyclical Buyback Mechanism

1. Executive Summary

This proposal introduces the Treasury Burn Buffer (TBB): a mechanism funded by redirecting 1% of treasury-bound revenue.

Unlike standard burn allocations, the TBB functions as a strategic reserve to be deployed exclusively during market drawdowns. By accumulating stablecoins during periods of stability and executing aggressive buy-and-burns during price dips, the protocol achieves maximum capital efficiency and provides a mechanical floor for $CAKE.

  • Burn Integrity: Current burn allocations remain untouched.

  • Counter-Cyclical Force: Provides buying pressure when it is needed most.

  • Optimized Deflation: Removes more tokens per dollar spent by targeting lower price points.

2. Funding Structure

The TBB is funded by a minor adjustment to the protocol’s internal revenue distribution:

Revenue Stream Current State Proposed TBB
Burn Allocation Unchanged Unchanged
Treasury Allocation 100% to Treasury 99% Treasury / 1% TBB Buffer

The 1% Flow:

  1. Revenue is converted into stablecoins (e.g., USDT/USDC).

  2. Funds are sent to a dedicated, on-chain TBB address.

  3. Assets are held exclusively for structured buybacks and subsequent burns.

3. Governance

To ensure trust and eliminate discretionary risk:

  • No Operational Spending: These funds cannot be redirected for salaries, marketing, or incentives.

4. Tiered Deployment Framework

Deployment is triggered by Drawdown (DD) levels, measured daily (00:00 UTC) against the 30-day Rolling High using a TWAP (Time-Weighted Average Price) oracle.

Tier Drawdown Cumulative Deployment Marginal Deployment
Tier 1 -5% 5% Initial entry
Tier 2 -10% 12% +7% marginal
Tier 3 -20% 25% +13% marginal
Tier 4 -30% 45% +20% marginal
Tier 5 -40% 65% Accelerated buyback
Tier 6 -50% 85% Capitulation support
Tier 7 -60%+ 100% Full deployment

5. Execution & Post-Trade Transparency

To prevent front-running and market manipulation:

  • Execution Policy: Buybacks utilize TWAP execution over a set window (e.g., 24–96 hours depending on tier severity) with a strict slippage cap (e.g., 1%).

  • Ex-Post Disclosure: Following institutional standards (similar to MicroStrategy’s reporting), details are released after completion:

    • Tier triggered and total Drawdown.

    • Total stablecoins deployed and average buy price.

    • Total $CAKE permanently burned.

    • Remaining buffer balance.

6. Strategic Implications

  1. Market Resilience: Establishes a predictable, rule-based demand source during low-liquidity sell-offs.

  2. Capital Efficiency: Buying “the dip” allows the protocol to remove significantly more supply than it could during price peaks.

  3. Treasury Alignment: Aligns the Treasury’s success directly with the token holders by reinvesting into the scarcity of the native asset.

7. Long-Term Outcome

The Treasury Burn Buffer upgrades the protocol’s capital allocation strategy without compromising its core tokenomics. It transforms the treasury from a passive recipient of revenue into an active, automated guardian of token value, signaling a sophisticated approach to deflationary management.

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Hey thanks for the suggestion @Juapia, though I don’t think this is the best platform to discuss what is essentially a new proposal. Do let us know if you have any thoughts on the above proposal

On your proposal, I think there are tradeoffs between indiscriminate buybacks and burns of CAKE regardless of price and price-related triggers. The former keeps it simple while the latter tries to “time the market” to maximize burns. Also not sure if the proposal in its current form moves the needle enough to justify the lift though

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you can move the post to another topic. I dont want make a mess here. about kitchen proposal, ok. It is only admin changes.

About cake burn we need increase it and improve the efficiency. I think the kitchen can think about

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Proposal is live for voting here: PancakeSwap

One small change: the affected pools are all stablecoin pools that have one of the following tokens: USDT, USDC, USD1 or U, not two. The estimated impact remains at ~29% of annual Treasury revenue