From Farming to Bribing: PancakeSwap Proposes New veCAKE Strategy to Bolster Liquidity, Governance

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PancakeSwap (CAKE) recently proposed a new plan to channel a part of the CAKE token emissions towards enhancing the veCAKE community, effectively kick-starting its development.

Directing funds towards Bribes is proposed to boost the circulation of assets within the ecosystem and optimize the rewards system for CAKE.

“The Kitchen is suggesting to divert a part of its existing CAKE emission towards the veCAKE incentive program, meaning it will offer CAKE as rewards for participating in selected pools.”

The Proposal

The Kitchen’s suggestion is to redirect 500 units of CAKE from the approximately 29,184 CAKE produced daily for farming pools towards locker protocol incentives instead.

If the plan to strengthen the veCAKE ecosystem is effective, the suggestion implies that a bigger request for funds might follow. The success will be evaluated based on the size of the liquidity pools, total value locked, and capital productivity.

⚡️ The Kitchen is proposing to redirect CAKE Emissions from Farms to incentivize core pair liquidity and enhance veCAKE vote incentives.
The proposal aims to:– Redirect 500 CAKE/day to locker protocol bribes– No overall increase in CAKE emissions– Allocation based on a…
— PancakeSwap v4🥞 (@PancakeSwap) April 16, 2024

The plan makes it clear that its implementation won’t alter CAKE‘s deflationary nature since no new or existing emissions are being changed, only redistributed. Importantly, the total CAKE emissions will remain unchanged according to this proposal.

As per the proposal suggestion, should it be accepted, the Kitchen would dispense bribes on a “per epoch” scale. These bribes would then be shared among any locker protocol constructed using veCAKE. For instance, StakeDAO, Cakepie, and Hidden Hand are included in this category.

The announcement states that the distribution of bribes will be determined by their effectiveness in generating the highest yield for the amount of CAKE invested.

If the locker protocol bribe efficiencies are very close to each other, around a 10% difference, then it would be beneficial for the bribes to be shared equally between them. This approach minimizes risk to the ecosystem and maximizes value delivery. At present, this suggestion has gained approval from over 5500 votes.

The Role of veCAKE

In simpler terms, veCAKE is the name given to the governance token in PancakeSwap’s system. By staking or locking away CAKE tokens for a period ranging from one to four years, users receive veCAKE tokens as a reward. With these veCAKE tokens, they can participate in voting on proposed changes within the PancakeSwap community.

With their role as governing tokens for the platform, veCAKE holders have the ability to impact how CAKE tokens are distributed among PancakeSwap’s liquidity pools. In turn, this draws more liquidity into the veCAKE staking system, fostering a continuous cycle.

Implications of the Proposal

PancakeSwap’s plan to redirect a larger share of CAKE tokens from farming rewards to governance bribes aims to encourage greater participation in decision-making from engaged users.

Making this change could increase user involvement with PancakeSwap by encouraging more people to take part in its governance activities. Furthermore, it may lead to an increase in liquidity for veCAKE, resulting in a more varied and dispersed decision-making process over time.

Instead of redistributing 500 CAKE units every day from farming incentives, this change might lead to dissatisfaction among users who value the predictability of their farming rewards.

In addition, the plan aims to shift funds, potentially creating risks for smaller market participants. Larger entities holding greater voting authority may influence the distribution of CAKE rewards.

The proposal was initiated on April 16 and is set to conclude on April 23.

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2024-04-16 15:39