GM PancakeSwap Community and CAKE Holders,
On April 8th, 2025, we published a discussion proposal for CAKE 3.0 Tokenomics inviting our community to share their feedback about the proposal. We value your input and are committed to keeping an open, transparent dialogue with our community. Let's dive into some of the most common questions raised, along with the responses from the Chefs.
1. Is the deflation capped at 4% per year under this proposal?
No, the 4% is a target based on data from the past two years. Burns are tied to a percentage of volumes, as outlined in the tokenomics graphic. If PancakeSwap performs well and volumes are high, more CAKE will be burned. While it’s true that the CAKE burn is influenced by CAKE’s price, an increase in price also means liquidity providers earn more from rewards. Emissions can then be adjusted to more sustainable levels, with any excess burned to balance this dynamic.
2. If mCAKE and sdCAKE become depegged, will they still be redeemable 1:1? If the proposal passes, can you clarify the redemption process?
Yes, delegator addresses will be whitelisted from PancakeSwap, and participants in veCAKE Managers (such as Magpie, StakeDAO, and Aster) will have the ability to process redemptions from their respective platforms. The redemption ratio will remain 1:1 based on the smart contract, with all veCAKE Manager creations on PancakeSwap.
3. Why not make mCAKE, sdCAKE, and other wrapped Cake assets redeemable directly for CAKE by blacklisting the original veCAKE protocol addresses?
When users lock their CAKE via a veCAKE Manager, only the delegator can unlock and withdraw the CAKE and redistribute it back to the users. We cannot act on behalf of the delegators at the contract level, just as we cannot unlock CAKE for any other users. Therefore, users can only redeem their CAKE directly from the veCAKE Manager.
4. What incentives will exist for holding CAKE without revenue sharing, CAKE emission, or a gauge mechanism in place?
CAKE’s value will be driven by real utility and scarcity. As part of this proposal, the 5% of LP fees previously allocated to revenue sharing from the v3 0.01% and 0.05% fee tiers will now be redirected to the buy-and-burn mechanism, increasing the burn rate for these pools from 10% to 15%. Since these pools represent a significant portion of PancakeSwap’s overall trading volume, this change is expected to accelerate CAKE deflation. It aligns with our long-term vision of simplifying the model while enhancing burn efficiency.
PancakeSwap already allocates a majority of its protocol fees to buy-and-burn, and CAKE will continue to have utility through governance, TGEs and IFOs as outlined in the proposal.
Most importantly, there will be a clear and direct link between the protocol’s revenue and the CAKE holders’ benefit from the burn mechanism. This proposal seeks to maintain a strong deflationary trend by carefully balancing emissions (spending) with revenue (fees allocated to the burn).
5. We’ve heard some of the community would like to continue veCAKE with higher efficiency for emissions. Will this work in practice?
The proposed recommendations include: placing emissions caps on low-revenue generating pairs, linking fee generation to the emissions a pool receives, and raising the cost of bribes to create competition with pools that generate higher organic fees. While these are reasonable short-term solutions, they don’t address the core issue—they merely delay the problem.
Based on the data, pools that currently receive bribes would need to reduce emissions by at least 80%. These pools generate relatively low volumes and are essentially subsidized by more profitable pools. By reducing emissions and reallocating most of these emissions to the more profitable pools, the revenue flowing to CAKE lockers will decrease substantially. This will make bribes less attractive and leave users with no option but to accept lower returns on their locked CAKE.
This proposal seeks to provide users with the option to redeem their CAKE, rather than face a significant reduction in voting APR over multiple epochs or be penalized for redeeming early.
6. Given that half of the user base faces many geo-restrictions from participating in the TGE, how can PancakeSwap claim to be truly decentralized when such a significant portion of the user base cannot engage in key activities?
The TGE is a partnership between PancakeSwap and Binance Wallet, and as such, PancakeSwap must adhere to Binance Wallet’s compliance requirements. However, PancakeSwap IFOs are open to PancakeSwap users, and the new simplified model will increase accessibility for CAKE holders. This will make the IFO process more attractive to projects, allowing them to reach a broader user base.
7. How will emissions previously governed by the veCAKE system be managed in the new proposal? What will guide the decisions for reallocating rewards from existing pairs to new ones? What metrics will be used to evaluate these changes, and what’s the expected timeline for reallocating rewards? How will these changes be communicated to the community?
As we’ve used for the past 20 months, the guiding metric for allocating emissions is "Revenue per CAKE Spent." This ensures that for every emission, the protocol benefits by burning an equal or greater amount of CAKE. While most emissions will continue to maintain core pairs that support CAKE deflation (e.g., BNB-USDT), a portion will be allocated to expanding PancakeSwap's market share on new chains. In initial deployments (e.g., Base), more profitable chains like BNB Chain will subsidize the CAKE spend. Over time, we will optimize emissions based on volumes, making new chains profitable for PancakeSwap. A real-time burn and emissions dashboard will be launched for the community to track emissions allocations. As always, on-chain data will be available for anyone to view the CAKE allocated across different farms.
8. How will decentralization work in PancakeSwap with the proposed changes to staking and veCAKE? Will the lack of staking lead to manipulation by whales in governance proposals?
If the proposed changes are implemented, voting will shift to a direct model, where voting power is determined by the amount of CAKE held by each wallet address. When a proposal is made, a snapshot of CAKE holdings will be taken, and this snapshot will directly correlate with the voting power each user holds, ensuring that voting reflects the amount of CAKE in each wallet. This approach keeps CAKE liquid during the proposal process while still linking voting power to individual holdings. Many other protocols have successfully operated governance without requiring staking, and the possibility of incorporating delegation features will be explored in the near future.
9. Will the veCAKE model remain active until the end of this voting cycle? If so, how will the disproportionate voting power of those who locked a large amount of CAKE recently affect the fairness of decision-making?
Yes, the veCAKE model will remain active until this proposal is either approved or rejected. If the proposal passes, there will be a final epoch where votes and bribes will continue to be recognized. After this final epoch, emissions reductions will begin, and emissions will be gradually redirected to the pools that generate the highest revenue and burn rates, while still maintaining attractive returns for liquidity providers. Throughout the decision-making process, veCAKE holders can continue to vote for specific gauges on the gauge voting page until the voting period for the proposal is completed.