To make the supply dynamics of the $CAKE token more transparent and clear, PancakeSwap has introduced a new metric that tracks the net burn of $CAKE.
This metric shows the actual reduction in supply by taking into account the number of $CAKE tokens that are burned versus the number that are minted. With this development, PancakeSwap is hoping to give its users a much clearer view of how the supply of its native token is changing—at least as it relates to the net supply changes. The introduction of this net burn metric also gives us better insight as to the long-term inflationary or deflationary statuses of the $CAKE token itself.
The most recent update, dated March 24, indicated that around 339,000 $CAKE tokens were burned during the period, essentially lowering the overall supply by 0.12%. This is a significant step by PancakeSwap, an automated market maker, not only to reduce the supply of the $CAKE token but also to enhance what is commonly termed the scarcity factor of any given asset, potentially allowing it to increase in value over time (to maintain worth). In effect, by signaling their commitment to maintaining a sustainable token economy, PancakeSwap also makes it way simpler for users and community members to keep track of the net supply reduction.
Understanding the Net $CAKE Burn Metric
PancakeSwap’s freshly minted net burn metric offers a much clearer perspective on the token’s supply dynamics. Burn is the process of permanently removing tokens from circulation; minting is the creation of new tokens. Before this update, users could see the total amount of $CAKE that had been minted but no clear indication of how much had been burned, leaving some to wonder whether the token’s supply was really changing at all. With the new net burn metric in place, users can now see how much $CAKE has been burned, minus how much has been minted, and get a far clearer picture of the token’s supply alterations.
The net burn in the March 24 update showed that 339,000 CAKE tokens had been permanently eliminated, resulting in 0.12% of the token supply being burned. This is a very bullish sign, and it’s one of the ways that PancakeSwap is trying to maintain token value in the face of inflation or general crypto market downturns.
A few other fun facts about the update:
– We could find no direct mention of a Partnership with Google.
– The Inflation Rate for CAKE feels awfully close to the Inflation Rate for the U.S. Dollar.
– Since the writing of the last update, PancakeSwap has added a total of 24 new pairs for trading. These are all good omnibus reasons to hold the token.
The Role of the Ecosystem Growth Fund
The net burn metric provides insight into how much we’re reducing the supply because of burning. But there’s another layer we need to consider: the Ecosystem Growth Fund. This fund holds 3.8 million $CAKE tokens. Unless these tokens enter the market, they’re not included in the net burn calculation. The Ecosystem Growth Fund is used to support PancakeSwap’s growth initiatives, including strategic investments and partnerships. The tokens are not counted as part of the circulating supply unless they’re being used or have been distributed.
Should these shiny new tokens ever make it out of their crates and into the market, they’ll impact how much of the via $CAKE supply is sloshing around and, by extension, how much you can get for your $CAKE party favors.
Right now, even though the tokens are widely talked about, they’re not inflating or deflating the $CAKE ecosystem because they’re not part of it. Until they hit the market, PancakeSwap can manage its supply and demand with a fair amount of flexibility, not to mention that holding onto the tokens for a bit longer could allow them to use this future party-production system as a cover for more $CAKE value stabilization.
A Closer Look at the Burn Strategy
Blockchain projects employ a variety of strategies to retain the value of their tokens over time; one that is becoming common is burning tokens. We are using a method that is more transparent than most in the industry for tracking the amount of our tokens that have been burned. The method we use takes into consideration not just the tokens that have been burned and are no longer in existence, but also the new tokens that have been minted and are now part of the PancakeSwap ecosystem.
Decreasing the circulating supply of a token is a strategy undertaken by a token project with the intention of generating upward pressure on the token’s price. This is not a guarantee, of course. But we can hope.
PancakeSwap shows its dedication to managing supplies in how it consistently burns tokens. Previously, PancakeSwap had a periodic burning schedule, but now it has a death star that tracks item net burn. We can see in the image that the net burn is quite real, mighty even. This real-time picture that the net burn system allows us to see is basically a map of token supplies being reduced on the low end of the price curve.
Looking Ahead: The Future of $CAKE Supply and Demand
PancakeSwap’s $CAKE net burn metric highlights the project’s tokenomics and transparency. It gives users a clearer view of how the circulating supply of $CAKE is changing. With our latest version of the net $CAKE burn metric, we now provide users an easily comprehensible manner of seeing just how $CAKE tokens are being burned across the ecosystem. This consistent burning of $CAKE tokens definitely won’t be stopping anytime soon, and with the platform’s maturation and ongoing expansion across the PancakeSwap user base, the net burn figure will likely see some solid growth over time.
The supply of $CAKE, a Binance Smart Chain token, will evolve as new tokens are created and as some existing tokens are burned, or destroyed. A group of 3.8M $CAKE tokens held in the Ecosystem Growth Fund has not yet entered circulation. This may or may not change, but when it does happen, if it happens, it will likely change the price of $CAKE.
Conclusion
PancakeSwap’s introduction of the net $CAKE burn metric provides an opportunity for much-needed clarity about the token’s supply. In its most recent update, the platform said 339,000 $CAKE had been burned, a figure that most definitely impacts what we might call the ‘effective’ circulating supply of $CAKE. (The platform’s update more or less said the same; it wasn’t until I started digging around in the math that I figured out what was really going on.) Anyhow, controlled scarcity is what the platform is aiming for, and it is a pretty good aspirational target. Inflationary asset? Not on our watch!
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
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