PancakeSwap Proposes Tokenomics v3 to Boost Liquidity, Cut Emissions by 43%

PancakeSwap, a leading decentralized exchange, has unveiled a new proposal aimed at overhauling its tokenomics model. The proposal, known as Tokenomics v3, seeks to enhance capital efficiency, simplify governance, and promote sustainable growth. A central aspect of this proposal is the deprecation of veCAKE, which will be replaced with direct emissions management and a maximum one-year lock. This change is intended to boost liquidity and streamline user participation.

Critics, however, have raised concerns about the potential implications of this proposal. Michael Egorov, the founder of Curve, described it as a "governance attack," arguing that CAKE insiders could effectively eliminate the governance rights of existing veCAKE holders and force-unlock their own tokens post-vote. Egorov warned against making veGovernance upgradable, particularly the lock part, suggesting it could lead to governance integrity issues and emissions control challenges.

Other critics, such as forum member Hubert, questioned the motivation behind the change. Hubert argued that the proposal was influenced by bribes from Magpie Finance and similar Convex-style forks, which siphoned emissions with little benefit to PancakeSwap. Hubert suggested that the solution was not to eliminate veCAKE, which he considered one of the best veModels in the market, but rather to cap emissions to depegged mAsset pairs and restructure incentives around fee generation.

Supporters of the v3 proposal counter that veCAKE has failed to curb CAKE sell pressure and has introduced inefficiency and opacity into the system. The new model aims to cut emissions by 43% and redirect incentives to high-volume, high-fee pools. This shift is expected to create a more intuitive user experience and better align incentives with real participation. Users will be able to stake directly for governance, liquidity, and Initial Farm Offerings (IFOs) without the need for lock-ups, reinforcing PancakeSwap's commitment to community ownership.

The proposal also includes a significant reduction in CAKE emissions, from approximately 40,000 to 22,250 CAKE per day. This reduction will be phased in over three stages, with the total annual emissions decreasing from 14.6 million to 8.1 million CAKE. The saved emissions will be redirected towards CAKE burns, further enhancing deflation and protecting the long-term value of CAKE in circulation.

The new utility model will allow users to participate in governance, IFOs, and Token Generation Events (TGEs) without the need to stake CAKE. This includes direct participation in IFOs using a non-custodial wallet and flexible governance voting, where users can stake tokens only for the duration of the vote. These changes aim to reduce barriers for users and promote a more permissionless DeFi experience.

PancakeSwap's proposal reflects its long-standing commitment to transparency. All data related to CAKE burns, emissions, and volume will be publicly available on Dune Analytics, and fire/mint reports will increase transparency. The community is encouraged to provide feedback on the proposal, which will go to a vote. If passed, the rollout will begin immediately, marking a significant step towards a simpler, more sustainable CAKE ecosystem.