Proposal to reduce Farm Emissions for PancakeSwap v3 (“v3”)

The last CAKE Farm emission reduction enabled the migration of v2 Farm emissions to v3, with a 32% reduction in farm emissions.

As our goal is still for CAKE to become emission neutral or even deflationary, we wish to continue the conversation with our community and hear your thoughts.

tl:dr;

Overall Trading Emissions Reduced from 2.03 to 1.96, of which:

• Farm emissions on BNB Chain reduced from 0.98 to 0.91 CAKE/block
• Weekly vote to reduce 0.01 CAKE/block on certain BNB Chain v3 farms
• Emission reductions are detailed below:

Read before voting 📖

Before you vote, please make sure you understand the impact of the long and short-term effects of CAKE emissions changes on our tokenomics.

1️⃣ Read and digest the CAKE Tokenomics documentation

2️⃣ Read this proposal in full

3️⃣ Make up your mind, and cast your vote!

Reducing v2 and v3 Farm emissions on BNB Chain - Explanation 🥞

With the launch of v3, a significant upgrade to capital efficiency has been introduced to v2 liquidity providers (“LPs”), allowing them to concentrate their liquidity in tighter ranges.

As a result, capital is up to 4000x more effective, with LPs also enjoying outsized trading fees. (Please see the graphic above for an example.)

Based on the previous Farms emissions voting proposal (link here), we have reduced v2 Farm emissions from 2.18 to 0.2 over 45 days to support the v3 transition.

With the release of Trading Rebates for locked CAKE stakers, upcoming bCAKE for v3 and Position Manager, we now propose to remove the remaining 0.04 CAKE/block emissions on v2 which cover the following:

1️⃣ BTC pairs

2️⃣ ETH pairs

3️⃣ BNB pairs

Trading on these tokens are already fully supported by v3, and therefore CAKE emissions for these farms are no longer required. The remaining v2 Farm emissions are given to CAKE pairs and v2 project Farms.

As we migrated Farm Emissions to v3, we have also noticed that v3 does not require the full 1.0 CAKE/block to provide the best execution for traders on BNB Chain. Currently, v3 CAKE emissions have been increased only up to 0.78 CAKE/block.

Due to the out-performance of v3 Farms, we propose to reduce v3 BNB Farm Emissions from 0.78 CAKE/block to 0.75 CAKE/block immediately.

The 0.03 CAKE/block reduction will apply to the following farms.

• BUSD/BNB (CAKE APR: 6.24% -> 5.18%); and
• USDT/BNB (CAKE APR: 7.52% -> 6.54%)

After that, the Kitchen will aim to propose a 0.01 - 0.02 CAKE/block reduction at least every fortnight on any number of BNB Chain v3 farms if the trading volume data suggests that the AMM volume market share will not be meaningfully affected.

We will observe the effect of each weekly cut on TVL and trading volume to decide if and where we can cut in the following weeks.

The purpose of the fortnightly reduction is to find the least amount of Farm Emissions required to sustain current trading volumes and CAKE burn on BNB Chain.

This gradual optimization will ensure that we get closer to ultrasound CAKE fortnightly while ensuring that we maintain our leading position on BNB Chain.