Good afternoon PancakeSwap community and CAKE holders!🐰
Here’s a recap for those who missed the live AMA on April 26th on Telegram Main Group.
Our chefs discussed the CAKE Tokenomics v2.5 Decision proposal and answered pre-collected and live questions from our community.🤝
Chef Fran🧉 was the AMA’s host.
Q. Chef Fran 🧉: I locked my CAKE for one year, and now APR has changed. What do you think about people locked for a long time?
A. Chef Mochi 🧑: We understand the concern. In the initial discussion proposal, we sought feedback from the broader community on how to manage the high inflation of the Syrup Pool since many approaches can be taken. We have incorporated that feedback into the revised proposal options, which provide a reasonably long duration of relatively higher inflation that goes mostly towards long-term stakers given how we heavily weigh long-term CAKE stakers. Also, given both the community and Kitchen's desire to get CAKE to a sustainable low inflation rate, current stakers will be farming all the remaining high-inflation APRs on Syrup Pool for the remaining period as we do not expect to raise CAKE Syrup Pool emissions in the future.
If the community passes this vote, the significant change for existing CAKE stakers is that future stakers who join during the low-inflation period will no longer earn high CAKE staking rewards. This means there will be a relatively tiny dilution to the current stakers who are staking during this period.
Q. Chef Fran 🧉: When will we see CAKE on ETH chain and other chains?
A. Chef Bun 🐰: With the deployment of V3, CAKE token is already available on Ethereum. We encourage you to provide liquidity on V3 and stake those liquidity positions in the farm to earn CAKE naively on Ethereum. And stake the earned CAKE in the Syrup pool, now available on Ethereum, to earn various other project tokens.
As we expand our DEX to cover more blockchains, CAKE will be brought along with our other iconic products like Farms, Syrup Pool, and IFO.
Q. Chef Fran 🧉: Isn't the 750M hard cap far away now? Would you be reached? Don't we need a new lower hard cap??
A. Chef Mochi 🧑: If the final proposal passes with Option 1 or 2, the hard cap is expected to take quite some time to reach. We may consider lowering the hard cap later.
Q. Chef Fran 🧉: If we reach neutral emissions, is there a way to stop them, and instead of week burns, use all buyback CAKES for Syrup Pool and Farms rewards?
A. Chef Mochi 🧑: We will likely continue the CAKE burn and do buybacks for distribution instead. Most of the protocol revenue is directed to burn because this is the most direct way to counterbalance the inflation of the CAKE token. Even if we were to have no more staking emissions on CAKE Syrup Pools (which is what some other leading DEXs have moved to - see FAQ), we still have emissions on Farms. A significant advantage of PancakeSwap is the significant runway of CAKE emissions which can help to attract TVL from DEX protocols which no longer emit liquidity mining rewards. As TVL is a critical factor in driving trading volumes, CAKE emissions on Farms will help attract TVL, generating trading volume on the AMM and the revenue that will burn into distribution to distribute CAKE lockers.
If we were to end the burn completely, CAKE holders and stakers lose a significant source of buying pressure which balances CAKE inflation from Syrup Pools and Farms and must depend 100% on users and protocols buying CAKE to counterbalance the inflation on farms. Lower value CAKE will then require more emissions to incentivize liquidity miners, which supports even more inflation. If we buy back CAKE and give it to users, we effectively create extra selling pressure if we do not burn them since users may elect to sell the CAKE.
Q. Chef Fran 🧉: Why can you not scrap flexible and do fixed 1-4 years only with revenue for the ones fixed for longer?
A. Chef Mochi 🧑: Both proposal options in the final proposal have a similar effect to what you are suggesting. Currently, locked CAKE has a significantly higher share than the flexible pool in rewards distribution. Therefore, protocol revenue sharing is weighted heavily towards longer stakers as well, similar to how current CAKE staking has a much higher APR than flexible staking. The flexible option is available but receives very little emissions or future benefits relative to locking.
Q. 🧉: What is the issue in stopping minting or very little for only stakers and then working on a deflationary model?
A. Chef Mochi🧑: We posted two proposals this month, both seeking to reduce minting—one on Farms and then this one on Syrup Pool.
For Farms, completely stopping minting is very difficult. A significant advantage of PancakeSwap is the runway of CAKE emissions which can help to attract TVL from DEX protocols which no longer emit liquidity mining rewards. As TVL is a critical factor in driving trading volumes, CAKE emissions on Farms will help attract TVL, generating trading volume on the AMM and the revenue that will burn into distribution to distribute CAKE lockers. With v3, we can save on emissions since liquidity providers can now concentrate their liquidity and earn higher APRs. If they're in range and contributing to executed liquidity, they'll also earn the CAKE rewards since they're helping to execute trading volumes. This is an improvement in the model from v2 and allows us to safely reduce Farm emissions without affecting our trading volume.
Long-term, we want to optimize the emission on Farms such that the CAKE we emit to Farms is as minimal as required to ensure that we can continue to grow TVL and trading volume. The Kitchen also intends to improve our education on using v3 Farms so that users get a better idea of providing liquidity, thereby reducing reliance purely on incentives.
We are all the time working towards deflation for CAKE.
Q. 🧉: Now that Revenue Sharing is on the table, are there any concrete plans to develop/explore additional revenue streams for Pancakeswap?
A. Chef Mochi🧑: Yes, in Q2, we have several new products. Some are more established products, and some are more experimental, but the goal is to grow user count revenues and CAKE burn.
Q. 🧉: If we change the APY for the CAKE pool, how can Pancakeswap stand out from other DEX
A. Chef Mochi🧑: PancakeSwap stands out from other DEXs in various ways.
PancakeSwap remains one of the DEXs with liquidity mining rewards, which draws TVL and thus trades volume to us from other DEXs.
We also have a significantly broader product suite that complements each other. For example, Syrup Pool and IFOs support the launch and distribution of tokens, which is then supporting the trading volume of PancakeSwap. We also have several integrations that other DEXs do not have.
Staked CAKE supported by product benefits will allow users who want access to our products more reasons to buy and lock up CAKE
We have updated APRs for staking on other DEXs (see the FAQ). The proposed reduction aligns us with other DEX's APRs, not lower; thus, we remain competitive.
Q. 🧉: Why is there no option to cut the rewards directly to 0.35? The price is falling, and we will cut only half of it. What will happen in the following months?
A. Chef Mochi🧑: Based on the discussion proposal voting and separate feedback we received via various channels, a significant number within the community have raised concerns that an immediate cut to 0.35 CAKE/block would mean that recent 1yr stakers would immediately see their APRs cut from 40+% to ~2% before the introduction of protocol revenue sharing. They, too, recognize that we need to reduce inflation but feel that an immediate cut would be too drastic given the long duration of the lock. Therefore, we have drafted two options with various initial reductions and timelines to the most voted-on 0.35 CAKE/block emission rate.
There is a solidly united intention in seeking low inflation from both voters who chose the 0.35 CAKE/block option and the no change option. We ask that voters who wish to see the immediate cut accommodate a more gradual approach to reach a consensus from the entire community. In both options, there is an immediate significant reduction in current inflation. The more gradual option starts with a ~30% reduction to existing Syrup Pool emissions, and the more aggressive option begins with a ~55% reduction. Either of these options makes a significant impact on inflation immediately and also guarantees lower inflation with each passing month. Please refer to the FAQ to see the effect of CAKE inflation for various Syrup Pool emission levels as they're tuned down.
Q. 🧉: The last vote on Tokenomics was almost 50% and 50% against it. What did you conclude from that? People with locked periods worry about losing APR if it passes.
A. Chef Mochi🧑: Voting on the discussion proposal presents limited information on the community's full thoughts since voters only indicated their Syrup Pool emissions preference but couldn't express nuance through the voting system. Therefore, we also opened various channels on our socials, discussion channels, and through our ambassadors for detailed feedback.
The most common feedback, even from those who voted on no cut, is that CAKE inflation needs to come down but that a sudden cut is unfair and will alienate a significant portion of the community. Therefore, there's a strong consensus that inflation needs to be sustainable, but the change must be introduced more gradually. As you can see in the proposal options, both gradual reductions are apparent regarding when/how much Syrup Pool reductions are reduced. The proposal, therefore, addresses the main concerns around 1) lowering inflation, 2) providing more concrete forward guidance, and 3) allowing the token system and participants some time to make adjustments.
A gradual reduction also creates an incentive for stakers to re-lock. Given the certainty of low inflation in the future, the gradual decline represents the final window of time in which Syrup Pool participants can earn CAKE tokens, and their earned tokens will not be subject to high inflation by future participants.
Q. 🧉: Will more emission reductions still be on the locked CAKE Syrup Pool?
A. Chef Mochi🧑: It is highly unlikely that one of the two options passes. Please refer to the FAQ on our blog, where we have stated the principles around adjustments where we go deeper into the factors which we consider for managing emissions.
Q. 🧉: Will the burn rate remain the same?
A. Chef Mochi🧑: The burn rate depends on product usage and the fees. With v3, fees are lower on some pairs, but volumes across v2 + v3 have increased. As you can see on the Q2 roadmap, we have stated our plans in this quarter and future quarters to improve the products we serve and the chains we're going to. Both are seeking to increase CAKE burn
Q. 🧉:Are there other future utility features for locked CAKE?
A. Chef Mochi🧑: Yes. This quarter, we are looking to introduce benefits on the products (such as Simple Staking), which tier by locked CAKE.
Q. 🧉:Wouldn't it be better to end the burning? Stop the emission and transfer the amount burned as revenue share in stable?
A. Chef Mochi🧑: That would not be the case. I mentioned this above but will repeat the point about the burn.
Most of the protocol revenue is directed to burn because this is the most direct way to counterbalance the inflation of the CAKE token. Even if we were to have no more staking emissions on CAKE Syrup Pools (which is what some other leading DEXs have moved to - see FAQ), we still have emissions on Farms. A significant advantage of PancakeSwap is the significant runway of CAKE emissions which can help to attract TVL from DEX protocols which no longer emit liquidity mining rewards. As TVL is a critical factor in driving trading volumes, CAKE emissions on Farms will help attract TVL, generating trading volume on the AMM and the revenue that will burn into distribution to distribute CAKE lockers.
If we were to end the burn completely, CAKE holders and stakers would lose a significant source of buying pressure which balances CAKE inflation from Syrup Pools and Farms and must depend 100% on users and protocols buying CAKE to counterbalance the inflation on farms. Lower value CAKE will then require more emissions to incentivize liquidity miners, which supports even more inflation.
Q. 🧉:What is the rationale behind targeting a low annual inflation rate of 3-5% for CAKE, and how will it benefit the PancakeSwap community?
A. Chef Mochi🧑: High level, the tokenomics behind the supply and demand of CAKE is between minting CAKE on Farms and Syrup Pools (supply) and burning them with fees generated by activities on PancakeSwap or having them locked (demand). A low inflation rate of 3-5% means that as long demand grows by 3-5% annually, we are in balance on the supply and demand for CAKE. If PancakeSwap's burn plus lock growth exceeds the inflation rate, we expect demand to outstrip supply. This would be positive for CAKE token holders.
Q. 🧉:Can you explain how the real yield from PancakeSwap's protocol revenues will be distributed to CAKE stakers?
A. Chef Mochi🧑: Fixed-term CAKE staking users will automatically participate in a new protocol revenue sharing reward pool, earning rewards according to their share of locked CAKE against the total locked CAKE. The longer the remaining time in the CAKE lock, the more boosting effect on their claims. So longer-term staking users will be benefited the most. Then protocol revenue will be tallied in a fixed interval, either weekly or monthly, injected into the pool and instantly claimable when injected. Please note that this is not representing the final design. Details are subject to change based on further feedback.
Q. 🧉:How does the CAKE v2.5 update fit into PancakeSwap's long-term vision and strategy?
A. Chef Mochi🧑: PancakeSwap's long-term vision is to be a leading all-in-one DeFi protocol that serves all users. For the token, we have also always targeted deflationary tokenomics. The v2.5 update confirms to the protocol and all community members that we are about to enter a low-inflation period. What remains is for the Kitchen team to grow aggressively and continue refining our products across BNB Chain and all the other chains we expand to.
Q. 🧉:How will PancakeSwap ensure that the CAKE staking model remains sustainable and effective over time?
A. Chef Mochi🧑: Through the v2.5 proposal, we are taking an active step to change the model of rewarding users with token inflation for staking to one tied to the real growth of PancakeSwap and utility on PancakeSwap's products. The sustainability is introduced by tying CAKE staking to real revenues, which PancakeSwap can only generate paying users, rather than CAKE tokens, which the protocol can print regardless of the value generated.
Over time, the effectiveness of this model is tied to PancakeSwap's growth as a protocol. We are long-term focused on being a leading all-on-one DeFi protocol, which means more products and more chains.
Q. 🧉:How will the community's feedback be incorporated into the final decision on the CAKE v2.5 update?
A. Chef Mochi🧑: Community feedback was gathered after the initial discussion proposal through the Google form, our socials, TG/Discord, and any direct conversations we had. We received many different kinds of feedback, with various opinions on how to move things forward. We summarized the key concerns that were more prevalent in the proposal document and structured two options that could capture the most feedback.
As mentioned in the proposal document, there is a strong consensus toward low inflation. The key concerns were around how fast we enact the reductions and enable a gradual reduction period to accommodate stakers who still had stakes for a prolonged period while ensuring that our emission rates are competitive with those of other protocols. Information around these has been incorporated in the proposal or addressed with data in the FAQ and subsequently formed part of the structure of the proposed options.
Q. 🧉:What are the significant benefits of the cake v2.5 tokenomics for the cake investors/holders?
A. Chef Mochi🧑: For CAKE holders, there is high certainty that the tokens held will no longer be subject to high inflation levels. Instead, it will be sustainable with the growth of the protocol. For stakers, a gradual reduction will allow existing stakers to earn the last of the high-APR emissions as future stakers, after the reduction period, can no longer enjoy these high APRs. Additionally, protocol revenue is being shared on top of what is allocated to CAKE burn and will grow together with PancakeSwap as we go increasingly multichain.
Q. 🧉: What are the steps to save liquidity while we will reduce inflation as far as we know that many people could move their assets to competitors.?
A. Chef Mochi🧑: For Farm rewards, the introduction of v3 has allowed LPs to set their price ranges and concentrate their capital to earn higher fees from traders. CAKE rewards were also narrowed to active liquidity, which contributed to the execution of trades. This allowed PancakeSwap to lower general CAKE rewards to LPs as v3 increased the ability of PancakeSwap to trade more significant amounts of tokens with less capital. A proposal was passed to reduce liquidity mining rewards in response to this phenomenon. We understand that v3 is more complex. Therefore, while users are learning how to manage their liquidity in v3, we are also rolling out more educational content on various aspects of v3 and working on a position manager to help users automate some liquidity management.
Q. 🧉: Can we unstake the CAKE for some penalty involved?
A. Chef Mochi🧑: It is impossible due to the design of non-upgradable smart contracts. We've always ensured no privileged access, even to Chefs in the kitchen. And to guarantee the integrity of smart contracts, we rarely use any upgradable features.
Q. 🧉: I love the PancakeSwap interface; I only miss the analytic part. Is it planned in the future to include a report to see all movements done inside PancakeSwap? It would be great to do the analytic part inside PancakeSwap rather than jump into BscScan.
A. Chef Mochi🧑: We know that after the v3 deployment, calls are much harder to track on blockchain explorers like BscScan, as most of the calls are now done by multicall. And our page has an activity history, which only covers the Swap and Liquidity actions for now.
We are considering bringing a more generic operational history panel for our users to better track their actions within PCS. And on this note, for V3 LP, we are actively looking to bring more LP historical statistical displays by integrating with well-known 3rd party tracking and analytics services.
General words from Chef Icy: We understand that some members of the community are also asking for a 0.35 CAKE/block target immediately rather than Option 1, which is in about six months.
However, the kitchen does feel that there are other members of the community which may appreciate the extra time, especially since utilizing some benefits of PancakeSwap, such as our excellent v3 product, may take some getting used to.
To share some stats, if we were to cut to 0.35 CAKE / block target NOW rather than six months later, the annualized inflation difference is about 1.8%. We understand that this may be 1.8% too high for some users. Still, this is a reasonable middle ground between cutting inflation aggressively and giving some time to other users.
Don’t worry; we’ll also be super aggressive on other initiatives 😉
But in this case, we believe Option 1 is the optimal balance between an aggressive and meaningful cut to inflation, but also giving some space to other users in the interim 6 months 🙂
Q. Does Kitchen plan to increase other Pools (Stake CAKE base) to incentivize holders? Because they also play a crucial role
A. Chef Icy 🥞: The number of pools has increased significantly in the past few months! We’ll continue to work hard to bring projects to our Syrup Pools 🙂
Q. Is V3 going to land on the pancake-Aptos platform? If yes, when? The platform seems left behind compared to Bsc and Eth. What about the squad NFT? another path that feels abandoned; squad holders will get extra features and benefits in the future.
A. Chef Bun 🐰: Aptos is a MOVE-based blockchain, drastically different from Bsc or Eth. A lot of work has to be put in to migrate our V3 to cover Aptos
But, just a sneak-peak (and leak), we have some V3 prototypes in our kitchen built by our brilliant MOVE language master. And when the time is ripe, we will share more details about our V3 expansions.
Regarding the second point about crosschain development. As you may notice this is the start of our crosschain journey. We will build a stronger connection between products we deploy on other chains and existing products on BSC.
Q. Why do we give cake awards to LPs? Instead, giving an lp award from the fee incomes will stop inflation to a large extent.
A. Chef Icy 🥞: I incentivize LPs as they form a virtuous circle ➙ more LP ➙ better price execution ➙ better trading volumes ➙ higher buyback-and-burn
Q. Community is 50%yes 50%no, meaning many people are high apr. When we lose investors, the cake price is a big crash. What do you think about a longer time to adopt low inflation/deflation ? 15 months or 18 months? Why do you want to switch to deflation too quickly? The shock of this is lost, long-time investors.
A. Chef Mochi 🧑: Based on our feedback, many voters who voted to keep the current Syrup Pool allocation did so because they believed the proposal was pushing for an instant reduction. We see this in the written feedback from users, and many of them recognize that Syrup Pool emissions need to be reduced over time as inflation pressures are very high.
Q. When new IFO?
A. Chef Icy 🥞: Quality IFO projects only, so going to take some time. We are working hard on it
Q. Why do we give cake awards to LPs? Instead, giving an lp award from the fee incomes will stop inflation to a large extent.
A. Chef Mochi 🧑: LPs are not providing liquidity risk-free in the pools. While they earn fees from traders, they also suffer impermanent loss. Additionally, some levels of CAKE rewards allow us to attract liquidity from other DEX platforms, which drives trading volumes, and trading fees, which result in CAKE burn.
Q. When can CAKE holders expect to earn revenue from the protocol?
A. Chef Icy 🥞: Aiming end-June
Q. Was there foresight in the Kitchen of mass dump from millions of coins hitting the market simultaneously? Why was nothing done earlier to mitigate this? I.e., actual beneficial use cases for locking so long? Can the Chefs admit that the locked pool is a detriment to the protocol and that other incentives can be used to promote an attractive, flexible pool that investors will FREELY buy into?
A. Chef Mochi 🧑: The current level of Syrup Pool inflation is unsustainable. However, we have been reducing Syrup Pool emissions on this. We acknowledge that it has not been sufficient and therefore are taking steps in this proposal to reduce it more aggressively.
We think that locked CAKE still has benefits when emissions are tuned to a more sustainable level. Locked CAKE allows us to introduce benefits to users more aligned with the platform regarding protocol revenue and product utilities. It also allows us to reward users using bCAKE, as they are more likely to lock their CAKE when rewarded for their liquidity which drives trading volumes, fee generation, and CAKE burn.
Q. 1. Will there be a new cake syrup pool for the long term in the future with a penalty feature when unstaked ? 2. Also, just like the cake syrup pool has different periods for staking, will there be the same time periods staking for other projects staking pools?
A. Chef Icy🥞: 1/ No – the smart contract design for the fixed term staking necessarily precludes unstaking before the fixed term ends, not just for the pool but for security and safety concerns. Introducing such a feature would open up a significant attack vector.
2/Yeah, for project token pools, we are experimenting with different CAKE caps (100 CAKE for the duration of pool, etc.) and different timings to optimize the benefits to project teams, based on their marketing and product timelines, which differ. So there wouldn’t be a standardised pool staking time.
Q. In what token will the revenue share
A. Chef Bun 🐰 In the current design draft. We will use all the collected revenue for CAKE buyback before injecting them for revenue sharing
Q. If No to ultrasound CAKE wins the votes again, will you create another proposal to reduce cake again? This is not good tbh
A. Chef Icy 🥞: I think for such an important decision it’s essential to have strong consensus from everyone. So while governance may be a messy process, we want to make sure that the PancakeSwap community can move as one
Q. Do you think that rewarding long term users with flexibility and incentive to stay long term would be better than a barrier to entry of locking? This scared away a lot of potential investors. A flexible pool with utility multipliers that grow ONLY with time spent in the pool, not time committed into the lock
A. Chef Mochi 🧑 Thanks for this suggestion. I believe you're referring to a flexi-staking model where points are allocated, and unstaking burns the points, which confer extra utility/rewards. This is also a valid model we've seen work in some situations.
However, protocol revenue to incentivize continued staking under the flexible model is the common underlying factor that allows this model to work. In effect, both the current locked staking model and the flexi-staking model will require strong underlying protocol revenues to support the staking. We can look into this in the future, but as currently designed, the locked staking model has most of the features of the Flexi model and wouldn't draw too many technical resources away from product development, as we're also looking to increase underlying protocol revenues to contribute to CAKE burn.
Q. When are performance improvements on the site?
A. Chef Bun 🐰: On BSC, currently, we have a huge selection of different liquidity sources, which may impact the performance of price quotes. Expect a number of optimizations to be applied in the coming weeks.
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Thanks for reading. Join us on Twitter, Telegram, in our Discord server, or our growing Reddit community!
Chef Fran🧉