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PancakeSwap Developers Launch Proposal to Reduce CAKE Token Supply by 300 Million Tokens

Ruholamin Haqshanas
Last updated: | 2 min read
Adobe Stock / JorgeEduardo

Decentralized exchange (DEX) PancakeSwap has introduced a proposal to significantly decrease the maximum supply of its native ecosystem token, CAKE. 

The developers seek to reduce the token supply from 750 million to 450 million, aiming to better align it with the current circulating supply of 388 million. 

In an official announcement on December 28, PancakeSwap revealed that the voting proposal for the reduction will last for a 24-hour period.

If approved, the proposal will take effect on January 4, 2024. 

The developers emphasized that the reduction aims to complement CAKE’s consistent deflation and accelerate its journey towards ultrasound CAKE.

CAKE’s Emission Rate Continue to Decline

When CAKE was introduced in September 2020, it had a net emission rate of 40 tokens per block, resulting in an annual inflation rate of approximately 80%. 

However, since then, the emission rate has been gradually declining. CAKE tokens are earned by users as staking rewards.

In April 2021, token-holders approved a proposal to adjust CAKE Syrup Pool emissions, reducing them from 6.65 CAKE per block to 3.0 CAKE per block. 

This reduction occurred over a five-month period, with emissions decreasing by 0.5 CAKE per block each month. 

Alongside a token burn mechanism, this adjustment made CAKE tokens deflationary on a net basis.

The PancakeSwap development team, after nearly three years of development, now possesses more accurate estimations of the incentives required to achieve growth targets. 

Commenting on the proposal, they highlighted the importance of lowering the total supply as a critical step towards achieving ultrasound CAKE and signaling a shift away from a hyperinflationary tokenomics model.

PancakeSwap currently stands as one of the most popular DEXs in the cryptocurrency landscape. 

As of now, the DEX boasts a total value locked (TVL) of $1.64 billion and is projected to generate $191 million in annualized protocol revenue.

PancakeSwap Launches New Voting System

The proposal to slash CAKE’s token supply comes after Pancakeswap launched a new voting system called “Gauges” last month. 

At the time, the DEX also introduced “veCAKE,” a new vote-escrowed system that allows users to vote on governance proposals and determine CAKE emissions allocations.

Notably, PancakeSwap has phased out its “syrup pool” reward system, previously enabling CakeDAO members to stake CAKE for an additional share of the exchange’s fees. 

Instead, additional fees will now be distributed exclusively to users holding veCAKE. 

Participation in PancakeSwap’s DAO governance now relies on veCAKE, a new vote-escrowed system distinct from vCAKE.

veCAKE tokens, obtained by staking CAKE, allow users to vote on governance proposals and determine CAKE emissions allocations through Gauges Voting.

Under the newly introduced system, CAKE holders gain the ability to vote on additional rewards for specific pools every two weeks. 

However, to participate in voting, users must lock their CAKE tokens in a smart contract for a predefined period. The longer the lock-up period, the greater the voting power.