Today, on the official X profile of PancakeSwap, a curious proposal has been published: to eliminate 300 million tokens of the crypto CAKE.
The tweet, in fact, proposes to reduce the maximum supply of the CAKE token from 750 million to 450 million, stating that reducing the supply by 300 million units would highlight PancakeSwap’s successful transition from a high inflation issuance model to a much more efficient path.
For now, it’s just a proposal made on X, and they promise that before publishing the final proposal, they will discuss it with the entire community.
Summary
CAKE: the new proposal from DEX crypto PancakeSwap
Currently, about 386 million CAKE tokens have been issued out of a theoretical maximum supply of 750 million.
The actual circulating supply is 263 million CAKE, so the reduction of the theoretical maximum supply to 450 million should not have an impact on the current actual circulating supply.
Despite this, the price of CAKE today has jumped up by 14%.
The point is that by reducing the maximum CAKE tokens by 300 million units, there is less likelihood that more will be introduced into the markets in the future. On one hand, those currently in circulation will remain in circulation – meaning the supply in the markets will not be cut – but on the other hand, the possibility of many more being introduced into the markets in the future would be greatly reduced.
On the other hand, CAKE’s performance in the markets in 2023 has been terrible.
Not only is the price still down 94% from the 2021 highs, but the bear market ended just two months ago. In fact, the bottom was not reached in 2022, but on October 20th of this year, at around $1. The year had started at $3.2, so the decline in 2023 has been very pronounced.
During the ongoing small bull run, it has risen to $2.5, but despite today’s +14%, it is still well below the price at the beginning of the year.
The crypto ecosystem of PancakeSwap (CAKE)
PancakeSwap is one of the most important DEX in circulation, and by far the most important on the BSC network.
It was born in the first part of 2021, so it is about two and a half years old.
In 2021 it had an incredible boom, so much so that even its CAKE token greatly benefited from it.
However, starting from December 2021, a decline began that brought its TVL from 6.5 billion dollars to 4.2 in January 2022, and then to 3 billion after the implosion of Terra/Luna and the failure of Celsius in June of last year.
The problem is that PancakeSwap’s TVL has continued to decline even further, to the point where this decline does not seem to have stopped yet.
By the end of 2022, it had dropped to 2.4 billion, and the lowest point was reached in mid-October of this year at 1.3 billion. At this moment, it has only risen to 1.5 billion dollars, which is half the level it had after the Terra implosion.
It is worth noting, for example, that the reference DEX, Uniswap, which is mainly based on Ethereum and its layer-2, saw the decline in TVL stop at 3 billion in October, but without a significant decrease in 2023.
So, this year while Uniswap was going down a little, PancakeSwap was still going down a lot.
Ultrasound CAKE
During the year PancakeSwap has renewed its tokenomics and its growth strategy.
All that is happening is part of the transition to the so-called ultrasound CAKE.
This is a deflationary vision that aims to reduce the supply over time.
It is therefore a strategy that concerns the future, and the reduction of the maximum supply goes precisely in this direction.
Part of this strategy is to burn CAKE tokens, and the easiest starting point is the tokens that have not yet been circulated.
The reasons for the cut of 300 million theoretical CAKE are three.
First of all, increase the level of certainty for the community about the future supply of the CAKE token. In fact, by reducing the maximum limit to 450 million, we are already getting close to the 386 million tokens already created.
The second is precisely that of having taken a step forward towards ultrasound CAKE.
The third is to ensure sufficient flexibility for growth.
Now we will have to wait for the community to express itself, but given today’s +14% on the markets, it seems that it has already expressed itself in favor of the initiative.
