The PancakeSwap Community Proposes Reduction in CAKE Token Supply Cap
The PancakeSwap community has put forward a proposal to decrease the total supply cap of its native token, CAKE. The proposal suggests reducing the overall supply limit from 750 million to 450 million tokens.
This move comes as CAKE has experienced consistent deflation and the platform focuses on advancing towards ultrasound CAKE. The current circulating supply is around 388 million tokens.
The team behind PancakeSwap, known as the “Kitchen” team, believes that this lowered cap will be sufficient to capture market share across all chains and sustain the veCAKE model.
Rationale for Adjustment
The PancakeSwap community has outlined several reasons for implementing this adjustment. When PancakeSwap was launched, the initial token supply was designed to provide incentives for bootstrapping the ecosystem. However, with three years of development, the team now has more accurate estimations of the incentives required for growth.
In addition, the total supply is an important metric for understanding token burns and future emissions. Reducing the supply cap is crucial to achieving ultrasound CAKE and signaling a shift away from a hyperinflationary tokenomics model.
PancakeSwap believes that a cap of 450 million CAKE tokens is reasonable and will ensure ample supply for future expansion, including gaining market share on Ethereum and Ethereum Layer 2s, as well as pursuing new initiatives like position managers.
Token Burn
A few days before this proposal, PancakeSwap announced the burn of over nine million CAKE tokens. This move aimed to reduce the circulating supply by destroying more than $19 million worth of tokens.
As of December 5th, 2023, PancakeSwap successfully burned 0.089% of the total CAKE supply for November 2023. This represents the third consecutive month of decreasing CAKE total supply, with a cumulative net mint reduction of -712,667 CAKE over September, October, and November 2023.
Hot Take: CAKE Surges After Proposal Announcement
Following the proposal to reduce the CAKE token supply cap, the price of CAKE experienced a significant surge. Within hours of the announcement, the price rose from $2.22 to $2.70, marking a 21% increase. Since then, the price has stabilized around $2.52.
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