- PancakeSwap has proposed reducing the total supply of its CAKE token from 750 million to 450 million, slashing the supply by 300 million.
- This supply reduction aims to shift PancakeSwap away from its original inflationary tokenomics model towards a more deflationary system.
- The proposal signals PancakeSwap adapting as the DeFi landscape evolves, making CAKE scarcer which could positively impact its value.
Decentralized exchange PancakeSwap has announced plans to reduce the total supply of its CAKE token from 750 million to 450 million. This proposal comes as the platform shifts away from its original inflationary tokenomics model towards a more deflationary system.
Background on CAKE Tokenomics
When PancakeSwap launched in September 2020, CAKE had a high emission rate of 40 tokens per block, leading to an inflation rate of around 80% annually. Users received CAKE as staking rewards from votes.
In April 2022, PancakeSwap token holders approved lowering CAKE emissions from 665 to 30 per block, reducing by 0.5 per block monthly for five months. Combined with token burns, CAKE has become deflationary.
Details of New Proposal
The 24 hour vote is expected to take effect on January 4, 2024 if approved. The proposal aims to better align with the 388 million CAKE currently circulating.
According to developers, “Lowering the total supply is a critical step to achieve ultrasound CAKE and to send a clear signal of PancakeSwap’s pivot away from a hyperinflationary tokenomics model.”
Why Does This Matter?
PancakeSwap is one of the largest DEXs, with $16.4 billion total value locked. The proposal to slash token supply by over $1 billion signals a shift to a more sustainable, deflationary model.
If approved, the supply reduction would make CAKE scarcer and could positively impact the token’s value. It also shows PancakeSwap adapting as the DeFi landscape evolves.