PancakeSwap, a leading decentralized exchange (DEX) on the BNB Smart Chain (BSC), has passed the CAKE Tokenomics v2.5 Decision Proposal that makes their native token scarcer.
The proposal aimed to transform the tokenomics model of CAKE, the DEX’s utility token. The primary focus being on low staking inflation where real yield is from the protocol’s revenues. It also looked at adjusting its product to favor longer-term CAKE stakers.
The v2.5 tokenomics proposal also reduces token incentives given to traders and stakers by more than 68%, moving CAKE toward a deflationary economy.
Additionally, it will reduce CAKE emissions on PancakeSwap’s primary liquidity pool, the so-called Syrup Pool, by as much as 94%.
The proposal was based on feedback from the PancakeSwap community. Therein, members greed that the current inflation rates of CAKE are unsustainable in the long haul especially with the launch of PancakeSwap v3 early this month.
Majority want aggressive reduction
PancakeSwap had laid out three viable options for its community to vote on to make CAKE “emission neutral.”
However, the first option which allowed for an aggressive reduction of CAKE was favored, considering the outcome of the vote.
PancakeSwap will cut the CAKE Syrup Pool emissions from 6.65 CAKE per block to 3 CAKE per block with immediate effect.
Afterward, the DEX will reduce CAKE emissions further by 0.5 CAKE per block for five months. This proposal targets PancakeSwap emissions at 0.35 CAKE per block in 6 months.
Opting for this means there will be a 94% reduction in CAKE emission rates, that is, the token rewards earned by stakers on the platform.
Many PancakeSwap community members hope this level will considerably drop CAKE’s annual inflation rate from the current 21% to between 3% and 5%.
PancakeSwap is the latest in a long line of crypto projects working hard to make their native tokens deflationary in order to reach better prices in the future, driven by the idea of scarcity economics.
CAKE is down 5.87% over the past month, per data from CoinMarketCap, making it one of the weakest cryptocurrencies in the market. At the time of publication, it was trading at $2.71.
The proposed drop in staking rewards has already resulted in an exodus of stakers. This is despite that the lower inflation rate will enhance tokenomics by reducing the dilution of its supply.
The amount staked has also decreased from just over 1b CAKE to about 677m CAKE after the PancakeSwap team suggested the tokenomics modification.
Per the announcement, PancakeSwap expects to implement the winning option by the end of June.