The PancakeSwap community has recently put forth a proposal to lower the overall supply cap of its native token, CAKE. The goal is to reduce the total supply limit from 750 million to 450 million. This proposal stems from the consistent deflation of CAKE in recent months and the platform’s focus on advancing towards ultrasound CAKE. By establishing a maximum cap of 450 million tokens, PancakeSwap aims to capture market share across different chains and sustain the veCAKE model. Currently, the circulating supply stands at approximately 388 million tokens.
The “Kitchen” team, responsible for managing the PancakeSwap platform, presents several compelling reasons for implementing this adjustment. Firstly, when PancakeSwap launched in 2021, the initial token supply was designed to provide sufficient incentives for bootstrapping the ecosystem. However, after nearly three years of development, the team now possesses more accurate estimations of the incentives required to achieve their growth targets.
Secondly, the total supply of CAKE plays a crucial role in understanding the impact of token burns and future emissions. Reducing the supply cap is integral to achieving ultrasound CAKE and signaling PancakeSwap’s departure from a hyperinflationary tokenomics model.
Ensuring Ample Supply for Future Expansion
PancakeSwap believes that the new cap of 450 million CAKE is both reasonable and sufficient for future expansion. This reduction leaves ample supply for various growth opportunities, such as gaining market share on Ethereum and Ethereum Layer 2s. Additionally, PancakeSwap can pursue new initiatives like position managers, benefiting from the adjusted token supply.
Following the announcement of the proposal, the price of CAKE experienced a significant surge from $2.22 to $2.70, representing a 21% increase within hours on Thursday. Since then, the price has stabilized around $2.52.
It is also worth noting that PancakeSwap recently burned over nine million native CAKE tokens in an effort to reduce the circulating supply. This move, which destroyed more than $19 million worth of CAKE tokens, aligns with PancakeSwap’s goal of decreasing the token supply. In fact, as of December 5th, 2023, PancakeSwap successfully burned 0.089% of the total CAKE supply for November 2023. This marks the third consecutive month of decreasing CAKE total supply, resulting in a cumulative net mint reduction of -712,667 CAKE over September, October, and November 2023.
The proposal to lower the CAKE token supply in PancakeSwap reflects the platform’s commitment to maintaining a sustainable tokenomics model. By decreasing the overall supply cap, PancakeSwap aims to achieve ultrasound CAKE and explore new opportunities for growth. The market response to this proposal has been positive, with a surge in the price of CAKE immediately after the announcement. With ongoing efforts to reduce the circulating supply, PancakeSwap is positioning itself for future expansion and continued success in the cryptocurrency market.
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