PancakeSwap To Reduce Maximum Token Supply by 40%

The supply reduction follows several changes to PancakeSwap's tokenomics throughout 2023

By: Owen Fernau Loading...

PancakeSwap To Reduce Maximum Token Supply by 40%

The community for PancakeSwap, the leading DeFi protocol on BNB Chain, has backed the project's latest bid to do away with inflationary tokenomics.

On Dec. 29, tokenholders passed a proposal to reduce the maximum supply of CAKE tokens by 40% from 750M to 450M with more than 97% support.

The proposal said the measure will facilitate PancakeSwap's CAKE token becoming deflationary - meaning more tokens are removed from supply through the PancakeSwap's burn mechanism than enter circulation as newly minted rewards for users. The move follows PancakeSwap adopting Vote Escrow (VE) tokenomics in late November, allowing stakers to vote on how CAKE rewards are distributed across the protocol in exchange for locking up their tokens.

"With a current total supply of 388M CAKE, the Kitchen believes this new and lower cap will be sufficient to gain market share across all chains and sustain the veCAKE model," PancakeSwap said. "Lowering this number is a critical step to achieve ultrasound CAKE and enables us to send a clear signal of PancakeSwap's pivot away from a hyperinflationary tokenomics model."

The price of CAKE trended sideways over the past 24 hours, but rallied 20% in a day after proposal went live on Dec. 22. CAKE is also up 39% over the past seven days.

CAKE/USD. Source: CoinGecko.

PancakeSwap's move to reduce CAKE's maximum supply follows a big year for the project, with PancakeSwap v3 - a fork of Uniswap v3 - deploying in March.

In April, PancakeSwap began discussing reducing the rate of new CAKE issuance after a major token unlock sent the price of its token tumbling. The project also sought to cash in on the rebounding GameFi sector in May with the launch of its web3 game, Pancake protectors.

Pancake Swap also deployed across a slew of new chains throughout the year, including ZkSync Era, Base, and Arbitrum. The protocol is currently live on nine blockchains, supporting spot and perpetuals trading, NFTs, and even an on-chain lottery.