Tokenomics 3.0 needs to be updated. 20k CAKE per day are being wasted for liquidity providers who are selling on holders’ heads.
As Chef Kids said in the AMA on Coinmarketcap that the value of CAKE is the value of the business of pancakeswap, so I propose:
1 - Stop the emission of new CAKE and ensure the supply fixed at the current total supply (371,571,498 CAKE).
2 - With the fees earned, the CAKE should be bought back, with the majority going to burning and a small part to the farms and ecosystem growth fund.
3 - At the end of each month, the max supply should be reduced to the new amount after the burning.
4 - That a report be published with the allocation of CAKE to the farms in the month and the efficiency or not of such allocation for the generation of value for PancakeSwap.
Check the math:
Last 4 burns: PCS burned 4025000 usd.
check the usd value here:
Distributed to farms:
20k cake per day = 600000 per month
with 2,5 usd per CAKE
1500000 usd per month to keep the same value going to farms
Conclusion:
In other words, from the fees earned, set aside 1.5M to give to the farms. The kitchen part will continue to go to the kitchen. And burn the rest. And can separate a part to growth fund.
Why PancakeSwap is minting?
It’s just a waste of money and resources and more work.
If PCS is deflationary and there isn’t stake, and Kitchen wants to simplify, there is no reason to mint.
On a high level, it seems what you’re proposing is quite similar to the current practice we have now, in that the resulting CAKE net mint would be the same, all things equal.
In our current practice, net burns = $4M (already accounted for the $1.5M emissions)
In your proposed example,
Minted CAKE = $0
New net burn = $4M + $1.5M saved in emissions = $6.5M
Emissions to farms = $1.5M
Final net burn = $6.5M - $1.5M = $4M
Plus, in your plan, we will still end up emitting 20k CAKE to liquidity providers per day, which seems to be what you are against.
One thing to note is that in your plan, the amount of CAKE emissions to farms will rely heavily on the amount of burns we generate. In periods where burns may be lower, it means we will have reduced CAKE emissions, which might cause a drop in TVL, leading to lower volumes… potentially starting a negative spiral. Our current arrangement ensures we will consistently have 20k CAKE (or whatever amount) per day to farms, and we can potentially adjust it higher/lower depending on CAKE price and the market’s needs.
On a technical level, it is also challenging to implement this, as our farms currently rely on the Masterchef smart contracts for CAKE distribution and it will not be easy to replace them completely.
Hi sir! Thanks for the reply. I really appreciate it.
I was against the proposal but I lost. I know to accept defeat lol. So I’m thinking about how to improve the protocol in line with what the kitchen proposed and the community approved.
I think PCS should actually test how much the cut in CAKE rewards for farms will impact TVL. I have many doubts as to whether PancakeSwap is wasting CAKE and whether PCS could optimize this. There are several companies that specialize in these calculations. But I think it is possible to cut it with minimal impact on TVL. Remember that farms have already had a reduction in costs with several Infinity mechanisms. You could do a benchmark test simulation with the numbers from the last bear market, for example, to see the scenarios.
If the volume is much lower than the current one, PCS may not have incentives for farms and this will affect TVL. But then you are assuming that if the volume drops too much, CAKE will become inflationary again and this will sustain the yield for farms. This could also start a death spiral. So much so that I think that with the current numbers it is very unlikely that both cases will happen.
But with the change I proposed, you send a message to the community: We will not burden CAKE’s tokenomics to sustain TVL.
PCS will focus 100% on real yield and seek income from volume. In addition to gaining in operational costs.And if this move is made, it could be necessary to open a positive spiral because if there is an increase in the value of the CAKE token, the entire protocol benefits.
With the current system, you must anticipate what will happen in order to act and try to avoid waste. With the system I proposed without mint, you can adjust after the event. For example, creating an emergency fund for times of low volume.
thanks again. I may be wrong but I think it would be good for the kitchen to think about this.
Hugs
We share similar thoughts in that some adjustment to the current emission rate is probably possible without affecting TVL too significantly to the downside.
We are open to further reducing CAKE emission, but it’s a decision we consider seriously and one that should be made with a sufficient buffer, as changing the emission rate too frequently is confusing and not good for the protocol.
Furthermore, while some may view our current emissions as more than sufficient, it’s important to remember that we can also tap on this emission source should we decide to expand to new ecosystems, where competition may be stiff. We are also well-served by our Ecosystem Growth Fund for this purpose, as well as for times when overall volumes may be lower.