According to a recent announcement, PancakeSwap, the renowned decentralized finance (DeFi) platform, proposed a significant reduction in its CAKE token total supply, a strategic move aimed at improving its market presence and driving growth.
PancakeSwap Maintains Supply And Demand
The team behind PancakeSwap, a prominent decentralized exchange (DEX), is proposing a significant reduction of 40% in the maximum supply of its native token, CAKE. The proposal aims to decrease the supply from 750 million to 450 million tokens. As of now, CAKE tokens are trading at $3.6.
In a recent announcement dated December 28, it was revealed that the community vote on this proposal to cut 300 million tokens from the supply will span 24 hours. Should the proposal receive the necessary approval, the changes are set to be implemented on January 4, 2024.
Over the past year, PancakeSwap has been the leader of tokenomics innovation. With a series of improvements beginning from CAKE Tokenomics v2.5 and culminating in the recent launch of the veCAKE Gauges System, the platform has shown a robust commitment to developing its economic model.
PancakeSwap’s decision comes after achieving consistent deflation in its CAKE token for several months. This deflationary trend is a positive indicator, showing that the token is becoming more scarce and potentially more valuable over time. The platform’s focus is now on accelerating its journey towards what it describes as ‘ultrasound’ CAKE – a term suggesting robustness and long-term sustainability.
The specific details of the proposal are as follows:
- Current Total Supply: 750,000,000 CAKE
- Proposed Future Total Supply: 450,000,000 CAKE
- Reduction in Total Supply: 300,000,000 CAKE
- Implementation: The proposal includes steps to decrease the maximum cap on token supply in line with these figures.
PancakeSwap Ensures Community Certainty On Token Supply
By reducing the total supply, PancakeSwap intends to enhance the impact of token burns and manage future emissions effectively. This step is vital in transitioning away from a hyperinflationary tokenomics model, signaling a new growth phase for the platform.
In 2021, PancakeSwap was launched with a focus on incentivizing ecosystem growth, leading to a considerable increase in token supply. Nearly three years into its journey, the platform has gained a clearer understanding of the necessary incentives for achieving its growth targets.
The proposed new cap of 450 million CAKE is designed to balance the need for a limited supply with the flexibility required for future growth initiatives. This includes expanding market share on platforms like Ethereum, Ethereum Layer 2 solutions, and exploring new ventures such as position managers.
When CAKE was first introduced in September 2020, it had an initial emission rate of 40 tokens per block, translating to an annual inflation rate of approximately 80%. Since then, there has been a steady decrease in this rate. CAKE tokens are distributed to users as rewards for staking activities.
On April 25, holders of the token voted in favor of a proposal to modify the emissions in the CAKE Syrup Pool. The adjustment saw the emissions rate reduced from 6.65 CAKE per block to 3.0 CAKE per block, with a further monthly decrease of 0.5 CAKE per block over five months. This change, in conjunction with a token burning strategy, has effectively made CAKE tokens deflationary on a net basis.
Shortly after the proposal was presented, an overwhelming 99.95% of the community, accounting for 70,000 votes from CAKE token holders, expressed their support in favor of the proposal.
In an effort to enhance scarcity and appeal to investors, PancakeSwap recently undertook a significant token burn, eliminating over 10 million CAKE tokens from circulation. These tokens, valued at around $34 million, were incinerated on December 26 as part of a deliberate strategy to reduce the total supply by 40%.
Reducing the supply of a cryptocurrency creates a perception of scarcity, which can enhance its value. In the market, where assets are often evaluated based on their potential for growth and rarity, a reduced supply can make a token more attractive to investors.
