For those who don’t know PancakeSwap is the Uniswap equivalent build on the Binance Smart Chain [BSC]. A decentralized exchange. Now when it comes to Binance Smart Chain, some might argue with its level of decentralization, but that is not the topic here. PancakeSwap is the number one app currently on the Binance Smart Chain hitting more than 10k daily active wallets recently, up to 14k on its ATH. If you follow the level of activity on any crypto app, 10k daily active wallets is a serious number. For example, Uniswap, the no.1 app on the Ethereum blockchain and probably in all crypto has more than 30k daily active wallets atm.

At first look the PancakeSwap platform is very similar to the Uniswap. But then it goes deeper into the farming game with liquidity tokens staking and more staking options in general. The overall look and feel of the platform in general is more like a fun and play and less into some serious money business. Still the currently the marketcap of the token is around 40M and there is more than 120M locked in liquidity.

Cake Inflation

In most of the cases when you provide a liquidity on the PancakeSwap platform you received the CAKE token as a reward. The obvious question is where does this token comes from and can it sustain its value?

As for in most cases the answer is inflation. New tokens are generated and rewarded to users.

According to the PancakeSwap docs page the current inflation/emission looks like this:

	Emission per block	Daily Emission
Emission	40	1,200,000
Burned	-15	-450,000
**Effective Emission	25	750000**

Obviously, they have reduced the inflation from 40 CAKE per block to 25 CAKE per block, but those tokens are still created and then burned 😊.

The inflation goes to:

60% farmers
40% syrup pools

The syrup pools acts something as mining pools for other tokens. You stake cake and earn some other token. Or earn cake. More staking options outside the standard liquidity providing ones.

Burning CAKE

Apart from the reduced inflation in general from the above the CAKE token is burnt from the following as well:

20% of CAKE spent on lottery tickets
9.09% from the collected fees to the dev fund
100% of CAKE raised in IFOs

There is a lottery system implanted on the platform, where you buy a lottery ticket for a chance to win the pot. 20% of that is burnt. Next the overall swapping fees are 0.2%, out of which 0.17% goes to the liquidity providers and 0.03% to dev fund (treasury). The devs are burning a part of their share.
At the end there is something called IFO (Initial Farm Offering) where a token is being listed on PancakeSwap with a sale for liquidity and the all the CAKE is burnt from the sales. (Not a 100% sure how this IFO works)

Next let’s take a look at some charts.

CAKE Supply Without Burns

This is a more than a year long extrapolated supply for the CAKE token based on the current settings for the inflation. As we can see without the burns the CAKE token will end up 2021 with more than 550M tokens in circulation. At the moment of writing this, near the end of 2020 the circulating supply of the token is around 80M. This is a huge inflation, more than 600% in the next year.

But as mentioned the CAKE token has a lot of burns so let’s check the actual inflation.

Burning CAKE

As we can see there is quite a lot of burns. They are coming from the methods mentioned above. Although the burns of 15 CAKE per block is basically reduced inflation, but they choose to represent it in this way as a marketing strategy. They can basically lower down the inflation and stop burning the tokens.

Tokens were bunt daily but in the last period they transitioned to monthly burns.

CAKE Supply Taking Into Account The Burns

When we include the burnt tokens into the CAKE supply we get this chart.

Well the burns help constrain the supply a bit but still its going up a lot. In the last 30 days on average there is 630k tokens created per day. From the starting 750k its more than 100k per day burned. The IFO model can generate a lot of burns if there is a lot of interest from projects. The last one generated more than 300k USD in CAKE tokens to burn.

Still with a 600k tokens per day there will be more than a 200M tokens created on a yearly basis. To sustain the 0.5$ price that the token has now the marketcap should increase more than a 100M from the around 40M at the moment.

Obviously even with the burns the CAKE inflation is still high. To overcome this the project needs to generate a lot of growth. More users and more projects. In the past few months, it has done a nice job we will see how it will go. Also I would expect at some point the inflation to be lowered further as they did once in the past, if the project is to sustain itself.

Price

The chart for the daily average price of the token looks like this.

A nice start and decline afterwards. In the last period it has been slowly going up.

Market Cap

The chart for the market cap looks like this.

Since the supply of the token can vary a lot its nice to look at the market cap as well. We can notice that in the last period the overall marketcap has been increasing even with the price of the tokens down or stable at some point. This is because of all the new tokens entering the market.

All the best @dalz

Posted Using LeoFinance ^Beta