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The governance token of PancakeSwap, DeFi’s second-largest exchange with $2.6B in trading volume over the past week, has taken a beating this week after a large number of tokens entered circulation.
CAKE is down over 24% in the past seven days. That makes it the worst performer among the top hundred digital assets.
0xGeeGee, a crypto trader, told The Defiant that CAKE dropped this week after a large number of tokens were unlocked from a mechanism called Syrup Pool this week. Syrup Pools allow users to lock tokens for up to one year in order to earn CAKE rewards. The longer a user locks, the higher the rewards.
The trader said that roughly 6M CAKE tokens were unlocked this week, representing only 0.08% of the token’s capped 750M supply. 0xGeeGee added that there is an additional 190M CAKE, or another 25.3% of the supply, locked in the Syrup Pool, with additional unlocks expected in the coming weeks.
The PancakeSwap team and the BNB Chain ecosystem at large are trying to figure out how to offset the selling pressure that comes with the increased supply.
Tokenomics Overhaul
To that end, multiple proposals to tweak CAKE’s tokenomics to become more sustainable went live in the past week.
Proposed CAKE Overhaul
PancakeSwap is unique in that it’s arguably the most successful DeFi protocol which didn’t originally launch on the Ethereum blockchain. At $2.2B, the decentralized exchange has the most total value locked of any project in that category.
This makes the efforts to make CAKE’s tokenomics particularly noteworthy — few projects besides those originating on Ethereum have established themselves as leaders in DeFi. With the revisions to its tokenomics, PancakeSwap could be the first major player to do so.
Beyond the debate swirling around CAKE’s tokenomics, it’s been a time of change for the protocol — it deployed its third iteration earlier this month. PancakeSwap also moved onto Aptos and Ethereum this year, breaking the protocol’s exclusive association with Binance Chain.
Those developments, as well as the impending unlocks, provide the backdrop for efforts by the project’s community to bolster CAKE’s value. A vote to cut down CAKE emissions to the syrup pool was narrowly shot down last Friday.
The project’s team has since held an AMA addressing CAKE’s tokenomics, and posted a recap of the event. On the same day, another proposal to modify CAKE emissions went live. This one is on track to pass, with 67% of voters agreeing to reduce CAKE emissions for the Syrup Pool from 6.65 CAKE to 3 CAKE per block.