The PancakeSwap community is proposing a significant reduction in the overall supply cap of its native token, CAKE. Currently set at 750 million, a newly unveiled proposal suggests decreasing the total supply limit to 450 million. This proposal is driven by CAKE’s consistent deflation over the past few months and PancakeSwap’s focus on advancing towards ultrasound CAKE. The goal is to establish a maximum cap of 450 million for the token, while the current circulating supply stands at around 388 million.
The “Kitchen” team, responsible for managing the PancakeSwap platform, expressed confidence in the effectiveness of this lowered cap. They believe it will be adequate to capture market share across all chains and sustain the veCAKE model. The team emphasized the need for this adjustment, pointing out that when PancakeSwap was launched in 2021, the initial token supply was set to provide incentives for bootstrapping the ecosystem. However, with nearly three years of development, the team now possesses more accurate estimations of the incentives required for achieving growth targets.
The total supply of CAKE serves as a crucial metric for understanding the impact of token burns and future emissions. Reducing the supply cap is seen as an important step towards achieving ultrasound CAKE and signaling PancakeSwap’s shift away from a hyperinflationary tokenomics model. With a new cap of 450 million CAKE, PancakeSwap believes it will have a reasonable supply for future expansion, including gaining market share on Ethereum and Ethereum Layer 2s, as well as pursuing new initiatives like position managers.
Following the announcement of the proposal, the price of CAKE experienced a significant surge, rising from $2.22 to $2.70, representing a 21% increase within a few hours on Thursday. Since then, the price has stabilized around $2.52. This development follows PancakeSwap’s recent burn of over nine million CAKE tokens, aimed at reducing the circulating supply and destroying over $19 million worth of CAKE tokens.
PancakeSwap’s commitment to decreasing the total supply of CAKE is evident in its consecutive monthly burns. 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 throughout September, October, and November 2023.
The proposal to reduce the supply cap of PancakeSwap’s CAKE token from 750 million to 450 million is seen as a significant step towards achieving ultrasound CAKE and signaling the platform’s shift away from hyperinflationary tokenomics. The PancakeSwap community has provided strong reasons for implementing this adjustment, backed by the confidence of the “Kitchen” team. With recent positive market reaction and a trend of decreasing supply, PancakeSwap is poised for future expansion and continued growth in the decentralized finance space.
