CAKE Tokenomics Analysis – April 2023

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As you all know, CAKE is emitted at a rate of 40 CAKE/Block, the PCS team then sends the allocated portion to be burned on a weekly basis (30.09 CAKE/Block to be exact as of 30 Dec 2022)[Let's call it the 'Constant Burn/Block'], and in addition, they use the platform's revenue to buy back some more CAKE and send it to the burn address [Let's call it the 'Additional Burn/Block'].

  • Note that before 16 Sep 2022, Additional Burn/Block included 46,000 CAKE per day that used to be lottery injections, but on that date it was moved to the Constant Burn/Block instead, without change to the emissions.


  • On 28 Jun 2022, emissions were reduced from 14.25 CAKE/Block to 13.75 CAKE/Block, this means 26.25 Constant Burn/Block
  • On 11 Aug 2022, emissions were reduced from 13.75 CAKE/Block to 12.75 CAKE/Block, this means 27.25 Constant Burn/Block
  • On 16 Sep 2022, the PCS team included the lottery injections into the Constant Burn/Block (12.75 CAKE/Block to 11.16 CAKE/Block), that is a 28.84 Constant Burn/Block
  • On 30 Dec 2022, emissions were reduced from 11.16 CAKE/Block to 9.91 CAKE/Block, this means 30.09 Constant Burn/Block

[Fig. 1] This is how it all this looks like as is.

However, to make a fair comparison, I've adjusted the emissions prior to 16 Sep 2022 by adding the lottery's 46,000 CAKE per day to the Constant Burn/Block to show what they should have looked like, and to calculate the real Additional Burn/Block for that period.

[Fig. 2] This is how it looks like when adjusted to be apple to apple.

In case you don't already know, all of the investors' profits come from the light green parts of these charts (Initial Emissions/Block); that is, every time the PCS team increases the Constant Burn/Block, it directly reduces the profits you make per block. On the other hand, Additional Burn/Block is CAKE bought back from the market, so it doesn't affect investors' profits.

Now, as you can see, everytime the emissions were reduced, the PCS team chose to reduce the profits rather than create more streams of revenue to increase Additional Burn/Block. Things have even gotten worse, the Additional Burn/Block has been constantly falling even though (a) CAKE price had already fallen below $5 during May 2022 and never came back up, so they there weren't big differences between these data points, and (b) the number of blocks per day stayed almost constant at an average of 28,500 Blocks/day between all data points.

[Fig. 3] CAKE price for the last 365 days.

To put all this in perspective, all the aggressive emissions reductions have resulted in increasing burning by 8.1% since 28 Jun 2022, but resulted in decreasing the profit pool by 18.5% during the same period. In reality, Investors have seen a sharper fall because the emissions that generate these profits have been spread out between multiple chains, so you now have less profits per chain. Now the latest vote aims to further cut emissions by 0.71 CAKE/Block further reducing overall profitability.

Multi-chain is a great concept, but its goal is to attract more traffic and transactions (not necessarily TVL), which generates more Additional Burn/Block. However, that would have worked far better before all the emissions cuts, when profits were higher. What we have now is a continuously decreasing profit margin being spread out even thinner which is not very attractive for generating traffic and transactions.

The ideal solution to reach an emissions neutral state is for the PCS team to focus their strategy around increasing Additional Burn/Block, which revolves around increasing utility and incentivising more transactions without increasing Constant Burn/Block, further enriching the ecosystem and generating even more Additional Burn/Block.

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