Pancakeswap Proposes New Tokenomics: 3-5% Inflation And 5% Trading Fee Sharing

PancakeSwap is proposing changes to the CAKE tokenomics in order to transition towards a deflationary model based on real yield and CAKE burn. They aim to target a 3-5% annual inflation rate for CAKE and propose a model with low staking inflation and real yield drawn from PancakeSwap’s protocol revenues.

They also plan to allocate 5% of trading fees from PancakeSwap v3 0.01% and 0.05% fee tiers monthly to CAKE stakers and increase CAKE emission weighting towards longer-term stakers. Longer CAKE stakers will be allocated more benefits across products, with longer stakers receiving higher benefits.

PancakeSwap has mapped out the impact of their proposed changes on their journey to ultrasound CAKE, on Syrup Pool APRs, and CAKE Inflation % based on the voting options. They recommend 0.35-1 CAKE/block for the Syrup Pool because it will immediately benefit existing CAKE holders and stakers, and loyal CAKE stakers will receive the largest share of protocol revenue.

They believe their proposal will align with PancakeSwap’s growth as a Top 3 DEX and that CAKE has strong utilities other than staking rewards. They do not recommend 2 CAKE/block or higher for the Syrup Pool because it remains highly inflationary to existing CAKE holders and stakers.

The most significant driver of CAKE burn comes from trading fees, and the subsequent CAKE buyback-and-burn incentivizes users to hold onto CAKE. PancakeSwap aims to create more value for users and drive the long-term success of the CAKE token. They plan to introduce three new products and expand to other chains to increase CAKE burn further.

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