The team behind PancakeSwap, a leading decentralized exchange (DEX), has proposed reducing the maximum supply of its native token, CAKE, from 750 million to 450 million. Currently, CAKE is trading at $3.58.
In an announcement on December 28, it was revealed that a 24-hour voting process would decide the fate of 300 million tokens. If the community approves, this significant supply cut would be implemented on January 4, 2024.
The rationale behind this move, as explained by the developers, is linked to CAKE's recent deflationary trend and the focus on advancing Ultrasonic CAKE. They believe that lowering the total supply aligns better with the current circulating supply, which stands at 388 million. Initially, CAKE had a high emission rate of 40 per block at its launch in September 2020, translating to an annual inflation rate of about 80%, but this rate has been steadily decreasing.
In a previous community decision on April 25, CAKE token holders voted to reduce Syrup Pool emissions from 6.65 CAKE per block to 3.0 CAKE per block. This reduction, decreasing by 0.5 CAKE per block monthly for five months, along with an effective token burning mechanism, has led CAKE to become deflationary in terms of net value.
The PancakeSwap team acknowledges that nearly three years into development, they now have a better understanding of the incentives required for growth. Reducing the total supply is seen as a crucial step towards promoting Ultrasonic CAKE and steering PancakeSwap away from a state of hyperinflation. This move is intended to provide a clear direction for the token’s economic model. As of the latest data, PancakeSwap boasts a total value locked (TVL) of $1.64 billion and anticipates generating $191 million in annualized protocol revenue.
