The decentralized exchange (DEX) PancakeSwap recently announced on twitter that they burned $CAKE tokens worth $123 million.

According to the PancakeSwap team, about $4.9M were returned to the market, $4.9M were placed in the NFT Profile and Vault, $751K were used for the PancakeSwap lottery, while the rest were allocated for the $DAR IFO.

What is PancakeSwap?

PancakeSwap lets you trade cryptocurrencies and tokens without the need for a third-party centralized intermediary. A blockchain platform run by the Binance crypto exchange, Binance Smart Chain, is used to create it.

Despite the fact that Binance is a centralized exchange, PancakeSwap was created by a team of anonymous developers and is not in any way affiliated with it.

Similar to this service is the Ethereum DEX known as Uniswap.

However, PancakeSwap, which is used for BEP-20 tokens running on the Binance Smart Chain, can be used to import tokens from other platforms and “wrap” them as BEP-20 tokens for use on the Decentralized Exchange.

PancakeSwap Burning $CAKE

As part of its deflationary strategy, PancakeSwap burns tokens periodically.Β 

Liquidity farming and staking pools generate an estimated 530,000 new tokens per day, according to the exchange.

When users trade or harvest yield on the platform, the exchange burns tokens in order to prevent the supply from exceeding the demand. Every Monday, PancakeSwap manually burns tokens.

To reduce the circulating supply of tokens, many crypto projects burn tokens. In the past, Binance’s quarterly burning of BNB tokens has boosted the coin’s value.

During the peak of CAKE’s popularity in April, the exchange’s value reached $47.68 per token. Traders and yield farmers were looking for alternatives to Ethereum at the time, and Binance Smart Chain usage soared.

A rise in the value of other DeFi projects may encourage CAKE token holders to hold out for an even greater gain.

It’s too early to tell if CAKE’s token burn will have any effect on the short-term price of the cryptocurrency.

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