PancakeSwap developers want to bring the issuance of CAKE tokens to zero.
The goal is to make this DeFi protocol neutral in token issuance or even a protocol with deflated issuance.
Therefore, the PancakeSwap crypto community voted this week in favor of a new governance proposal introduced by the developers to reduce the issuance of CAKE tokens.
Although this proposal does not reduce the emission of CAKE to zero, it does contribute significantly to this objective.
PancakeSwap voting opened last Thursday, June 23, and closed this Saturday with the approval of the crypto community, to reduce the amount of CAKE tokens issued per block by approximately 11%.
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The PancakeSwap developers had presented three options on token issuance to be voted on by the crypto community. The first of these options did not propose any change to the current CAKE issuance rate. Therefore, the issuance of new tokens in the protocol would remain at 4,25 CAKE per block if it turned out to be the winning proposal.
The second option that the protocol developers presented to the crypto community indicated a 5,88% reduction in the token issuance rate. This meant issuing 0,25 less CAKE per block.
The third option, which was the winner in this week's vote, with more than 84% of the votes from the PancakeSwap crypto community, proposes to reduce the issuance of CAKE tokens by 11,76% per block; that is, removing 0,5 CAKE from the issuance to reduce the protocol's current effective rate from 4,25 CAKE to 3,75 CAKE per block.
Why does PancakeSwap want to be deflationary?
Although the PancakeSwap developers say they are aware of the risks to liquidity that aggressively reducing token issuance poses, in the proposal they communicated that there are benefits in achieving neutrality or deflation in the issuance of new tokens.
In mid-May of this year, the PancakeSwap crypto community voted to limit the supply of CAKE tokens to a maximum of 750 million units. This in order to reduce inflation and guarantee stability to investors.
Since PancakeSwap went live it has reduced its effective token issuance per block by 65%. Initially, this DeFi protocol issued 40 CAKEs per block. Now, with the approval of the new governance proposal, this amount will be reduced to 13,75 CAKE per block.
CAKE rises 12% in the last week
It appears that CAKE price has benefited from the recent vote. In the last week, the value of this token in the market has risen by 12,2%. According to data from the CoinMarketCap platform, CAKE is trading at $3,28 per unit.
Source: CoinMarketCap
Although the developers of PancakeSwap aim for the issuance of CAKE to be deflationary for the benefit of the crypto community and the protocol, many have expressed some confusion about these actions.
On Twitter, some CAKE investors have asked what the point is in reducing the issuance of these tokens when a cap on their maximum supply has been implemented and millions of tokens are burned every week.
Continue reading: What is CAKE burned for weekly on PancakeSwap?
