Key Takeaways
- PancakeSwap is proposing a reduction in its CAKE token supply from 750 million to 450 million tokens.
- The proposal aims to align CAKE's total supply with its current circulating supply, enhancing deflationary dynamics;
- PancakeSwap seeks to pivot away from a hyperinflationary model towards ultrasound CAKE and clearer growth targets.
PancakeSwap, a leading decentralized exchange, is flipping the script on its tokenomics with a bold move to reduce the CAKE token supply.
The exchange is seeking to reduce its ecosystem token, CAKE, from 750 million to 450 million tokens, a move worth $1.074 billion.
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With CAKE tokens currently trading at $3.58, the proposal for this 300 million token reduction will be open for a 24-hour voting period, aiming for implementation on January 4, 2024.
The development team states that CAKE's consistent deflation and the pursuit of ultrasound CAKE are the primary motivations for this reduction. This adjustment aligns the token's total supply more closely with its current circulating supply of 388 million tokens.
Initially introduced in September 2020 with a net emission rate of 40 per block, leading to an 80% annual inflation rate, CAKE's tokenomics have since evolved.
On April 25, token holders approved changes to CAKE Syrup Pool emissions, reducing them from 6.65 CAKE per block to 3.0 CAKE per block, with further monthly reductions of 0.5 CAKE per block over five months. Combined with token burns, CAKE tokens have transitioned to a deflationary model.
The PancakeSwap development team acknowledges the importance of this reduction, noting that it is a critical step towards achieving ultrasound CAKE and signifies a clear shift away from a hyperinflationary tokenomics model. In their words:
After nearly three years in development, the team now has more accurate estimations of incentives required to achieve growth targets.
As one of the most popular DEXs, PancakeSwap currently boasts $1.64 billion in total value locked and anticipates generating $191 million in annualized protocol revenue.
