The decentralized finance (DeFi) protocol PancakeSwap is currently undergoing a community vote to address the issue of CAKE token inflation. The decentralized autonomous organization (DAO) associated with PancakeSwap has shown overwhelming support, with nearly 70% of votes in favor of an "aggressive reduction." The voting will conclude at 15:30 UTC on Friday.
The proposed tokenomics plan, known as version 2.5, aims to transition CAKE towards a deflationary model by significantly reducing token rewards for traders and stakers. The plan includes slashing CAKE emissions on Syrup Pools, the primary liquidity pool on the BNB Smart Chain, by a staggering 94%.
Syrup Pools allow users to lock tokens and earn CAKE rewards over a specified period. The proposal, which has been under consideration since early April, suggests an immediate reduction of CAKE emissions from 6.65 cakes per block to 3 cakes per block. Subsequently, a monthly reduction of 0.5 cake per block for five months will be implemented until emissions reach a level of only 0.35 cake per block each month.
This significant drop in emission rates, accounting for a 94% reduction, addresses concerns raised by PancakeSwap community members regarding the high inflation rate. The previous emission structure was considered unsustainable and lacked benefits for long-term CAKE holders.
The options presented to the community included both aggressive and gradual reduction approaches. The aim in either case was to bring emissions down to 0.35 cake per block, albeit with varying timelines. Approximately 10% of the members have voted for a gradual reduction, as per governance data. Interestingly, another option receiving nearly 20% of the community's votes is to maintain the current emission rates without making any changes.
It is important to note that reducing block rewards may have an impact on the yield for newer stakers, potentially leading to reduced capital inflow to PancakeSwap. This, in turn, could result in a decline in the platform's revenue.