PancakeSwap's CAKE Token Jumps After Proposal to Reduce Supply

PancakeSwap's CAKE token is rallying after the team proposed to reduce the token's supply.

CAKE jumped by as much as 20% on Thursday, the highest since May, according to Coingecko. The surge follows a proposal by PancakeSwap, a decentralized exchange, to reduce the maximum token supply of CAKE to 450 million from 750 million.

By decreasing the token supply by 300 million CAKE, the PancakeSwap team aims to signal a shift away from a high-inflation emissions model towards a more efficient flywheel, the team said in a post on X.

"After a year of hard work and deflation, we are razor-focused on ultrasound CAKE," the post said.

PancakeSwap is the top protocol on BNB Chain, with $1.4 billion of total value locked, according to DeFiLlama.

ChefMochi, the lead developer behind PancakeSwap, said in the exchange's forum that CAKE operates on a buyback-and-burn model. If the amount of CAKE bought and burned exceeds the amount emitted, it becomes deflationary, and vice versa.

As of December 5th, PancakeSwap had burned 0.089% of the CAKE total supply for November, marking the third consecutive month of CAKE total supply reduction, according to PancakeSwap's latest report.