GM, PancakeSwap community, and CAKE holders
Many of you have questions and feedback regarding the Proposal to Redirect Emissions for Ecosystem Growth.
We’d like to take this opportunity to address some of the common questions you’ve raised, so please review the following explanations regarding this decision.
If you have any additional questions about the proposal, please drop a message in our community channels or leave a comment on our forum topic.
1. Why does PancakeSwap change its policies or conditions frequently?
One of the main focus areas for the Kitchen has been CAKE's tokenomics. Since last year, the Kitchen has reduced emissions for farming rewards and redirected those funds to burning CAKE tokens, achieving a consistent annual deflation rate of 1-2%. This has only been achieved through an iterative model: making a change, reviewing the impact, and making further changes to accomplish the ultimate goal.
Further adjustments to the allocation of CAKE tokens aim to maintain trading volumes and utilize emissions more effectively, moving beyond traditional liquidity mining incentives to enhance overall ecosystem value.
2. Can you provide detailed information on how the redirected emissions will be used for ecosystem growth, and explain why a 10% emissions cut was chosen? Additionally, what metrics or examples illustrate the benefits of this decision?
PancakeSwap v4 represents the largest update to our protocol in the past 1.5 years since the launch of v3. This update introduces new opportunities for developers by enabling them to create hooks that enhance platform functionality. These enhancements will improve the trading experience through features like dynamic fees and reduced gas costs, while also optimizing liquidity provision by maximizing returns and capital efficiency.
We anticipate that these improvements will boost trading volumes and increase CAKE burn, ultimately attracting more traders and enhancing protocol revenue and market depth, benefiting all participants. To support the launch of PancakeSwap v4, we are implementing two key initiatives: the Grant Program, which allocates $250,000 to fund innovative projects within our ecosystem, and the Emission Program, which involves strategically reallocating emissions to 0.05 CAKE per block.
The decision to implement a 10% emissions reduction is informed by the positive effects of previous reductions made mid-to-late last year and current APRs across all chain deployments and farms. Last year, we successfully reduced CAKE emissions without sacrificing trading volumes or market share. Given that it has been several months since the last reduction, we believe we can continue this trend, conserve CAKE emissions, and maintain our market presence.
3. Do we have other upcoming products that may also require emissions?
Yes, we have several product updates and expansions that will require CAKE emissions. These include deploying to new chains, migrating liquidity from PancakeSwap v3 to v4, and increasing liquidity for meme coins, stablecoins, and core assets across all the chains where we are already active.
4. Can you clarify how the emissions from the Multichain Warchest have been utilized so far?
Out of the 1.25 CAKE per block allocated for the Multichain Warchest, we have utilized the emissions in the following ways:
5. How do you address community concerns about potential decreases in CAKE earnings in the short to medium term, and what reassurances can you provide regarding the long-term value despite immediate reductions?
The Kitchen has conducted a thorough review of all pools and farms across our chain deployments. This comprehensive assessment informed our decision to propose a reduction in incentives. We believe that PancakeSwap will maintain its trading volumes, market share, and, most importantly, competitive APRs for liquidity providers even after this proposal is implemented.
The alternative would be to overissue CAKE tokens to farms and pools that do not generate sufficient volumes to break even. Over the past year, we have successfully reduced CAKE emissions, making it a deflationary asset while simultaneously increasing our market share, expanding the number of supported assets, and adding more chains—all without negatively impacting our users or liquidity providers.
6. Why propose allocating funds to PancakeSwap growth instead of giving veCAKE holders the option to direct a portion of their voting power towards future CAKE growth through the gauge system?
While the veCAKE system effectively aligns long-term community members and adds utility to CAKE, the voting behavior of veCAKE holders does not always align with the protocol's broader needs. Currently, many veCAKE holders tend to vote for options that offer the largest bribes to maximize their short-term returns. This focus on immediate gains can overshadow the long-term potential of new products and initiatives, which may not provide the same level of short-term rewards.
For instance, consider a scenario where we want to bootstrap a BNB-USDT v4 pool. Although this pool has a high probability of generating substantial trading volumes and CAKE burns for the ecosystem, rational veCAKE holders may choose not to vote for it if it lacks attractive bribes. Consequently, the pool may struggle to gain the necessary liquidity, undermining its potential benefits for all CAKE holders.
This is where the Ecosystem Growth Fund comes into play. By allocating dedicated funds to support initiatives like the BNB-USDT v4 pool, we can provide the necessary emissions to bootstrap liquidity and ensure its success. This approach allows us to focus on long-term growth and sustainability, rather than being solely driven by short-term incentives.
Ultimately, our strategy aims to create a more balanced ecosystem that not only rewards current participants but also fosters the development of new products that can drive greater value for all CAKE holders over time.
7. Will PancakeSwap utilize the community forum for discussions prior to formal proposals?
Currently, a forum post is live here, where you can share your feedback and insights on the proposed changes. We encourage all community members to participate in the discussion by leaving comments and sharing your thoughts.
8. Will PancakeSwap consider a smaller emissions cut in response to community feedback?
If substantial feedback suggests that a smaller emissions cut would better serve PancakeSwap's interests and support the protocol's long-term health, we will carefully consider those perspectives.
However, based on a thorough review of APRs, volumes, and fees generated across the protocol, we believe a 10% reduction is the best option for long-term success. This reduction will be implemented gradually over several epochs to minimize impact and allow for assessment of pool performance.
9. What do you think about implementing temporary emissions cuts with a plan to restore them later, and how would this work?
While this approach may seem appealing, accurately predicting how long we will need these emissions is challenging. The success of our new products and initiatives can vary significantly, making it difficult to determine the timeline for their traction and the incentives they will require.
In our previous proposal, we demonstrated our willingness to adjust allocations if they exceed what is necessary to meet the protocol's needs. This flexible approach ensures that we can effectively respond to changing circumstances.
10. How does the Kitchen's request for discretion align with the program's overall goals and objectives, and what measures will be taken to ensure accountability during its implementation?
This discretion is not just a matter of convenience; it is in the Kitchen's best interest to utilize the Ecosystem Growth funds effectively, as our actions directly impact the protocol's revenue and long-term viability. With the ability to make swift decisions, the Kitchen can seize opportunities for innovation and investment that align with PancakeSwap’s strategic objectives.
We will establish regular reporting on the usage of the Ecosystem Growth allocation. Updates will be provided on the PancakeSwap forum, detailing how funds are being utilized, the outcomes of various initiatives, and any adjustments made to strategies.
The request for discretion aims to foster a more responsive and effective approach to growth initiatives, while our commitment to regular reporting will help maintain transperency and trust within the community.
11. Why change the Warchest name? Is it because Warchest has a meaning different from the new fund?
Initially, the emissions allocated to the Multichain Warchest were designated solely for PancakeSwap's deployments to new chains. However, our current strategy encompasses a broader range of initiatives.
In addition to supporting new chain expansions, we are now introducing products like PancakeSwap v4, which require incentives but do not neatly fit into the traditional "Multichain Warchest" category. By renaming it to "Ecosystem Growth," we aim to more accurately represent the fund's purpose and the diverse initiatives it will support.