The PancakeSwap community is suggesting a reduction in the overall supply cap of its native token, CAKE. A proposal unveiled on December 21st advocates for decreasing the total supply limit of the asset from 750 million to 450 million.
This proposal aligns with CAKE’s consistent deflation over the past few months and its intensified focus on advancing towards ultrasound CAKE. The objective is to establish a maximum cap of 450 million for the token, with the current circulating supply hovering around 388 million.
The “Kitchen” team, overseeing the PancakeSwap platform, expresses confidence that this lowered cap will be sufficient to capture market share across all chains and sustain the veCAKE model.
The rationale behind this adjustment is rooted in several factors. The PancakeSwap community explains that when the platform launched in 2021, the initial token supply aimed to provide ample incentives for bootstrapping the ecosystem. With nearly three years of development, the team now possesses more accurate estimations of the incentives needed to achieve its growth targets.
Moreover, the total supply is a crucial metric in understanding the impact of token burns and future emissions. Reducing this number is vital to achieving ultrasound CAKE and signaling PancakeSwap’s departure from a hyperinflationary tokenomics model.
PancakeSwap deems the new cap of 450 million CAKE as reasonable, ensuring ample supply for future expansion, such as gaining market share on Ethereum and Ethereum Layer 2s, and pursuing new initiatives like position managers.
Following the proposal, CAKE experienced a 21% surge within hours on Thursday, moving from $2.22 to $2.70. The price has since stabilized around $2.52.
In a related development, PancakeSwap recently announced the burn of over nine million native CAKE tokens, aimed at reducing the circulating supply. This move destroyed more than $19 million worth of CAKE tokens. As of December 5th, 2023, PancakeSwap successfully burned 0.089% of the total CAKE supply for November 2023, marking the third consecutive month of decreasing CAKE total supply and a cumulative net mint reduction of -712,667 CAKE over September, October, and November 2023.