PancakeSwap

Have you heard of the delicious name, PancakeSwap? 

PancakeSwap is an automated market maker built on the Binance Smart Chain established in 2020. The Binance Smart Chain developed by Binance is one of the world’s largest exchanges for cryptocurrencies. 

"DeFi’s hot new craze on food-themed tokens such as SushiSwap and BakerySwap had led to the name, PancakeSwap!"

PancakeSwap is a network that supports a faster and higher number of transactions. When Ethereum introduced smart contracts, Binance decided to install these into the Binance Smart Chain. They did this by copying and pasting Ethereum’s codes and making slight alterations. 

It focuses on the BEP-20 tokens on its exchange platform. The native coin of PancakeSwap is CAKE.

Key Points

- PancakeSwap has fast transaction speeds and lower transaction fees.  

- It had the lowest gas fees in comparison to other Defi projects on the Ethereum blockchain.

- PancakeSwap allows users to conduct yield farming which helps with providing liquidity and exchanging BEP-20 tokens. 

- KYC (Know Your Customer) verification is not required to trade on PancakeSwap. 

What is an Automated Market Maker (AMM)? 

A market maker ensures that there is enough liquidity for trading pairs on exchanges. For instance, if you wish to buy CAKE, the market maker ensures that there is a seller that is willing to sell their CAKE at the price the buyer is hoping for.

 A traditional market maker is a centralized exchange that acts as the middleman between the buyer and seller. Examples of centralized exchanges include Coinbase, FTX, and Crypto.com.

An automated market maker running on a decentralized exchange (DEX) like PancakeSwap uses smart contracts and algorithms. This removes the need for a middleman in the transaction between the buyer and seller. They use liquidity pools that hold the liquidity. Think of it as a pool that holds a bunch of CAKE tokens. The exchange occurs not between the buyer and seller but instead between the individual looking to buy/sell and the liquidity pool. 

PancakeSwap allows users like you to provide liquidity to these pools through staking and earning rewards. 

Why do people choose PancakeSwap?

1. PancakeSwap offers low trading fees

PancakeSwap offers a lot of pros when it comes to the utilization of the DEX platform. The trading fees are lower on PancakeSwap than on other exchanges. The transaction fee currently is at 0.25% of the trading amount. On exchanges like Uniswap, the trading fees can be up to 0.3%. 

2. PancakeSwap offers High Yields 

PancakeSwap can offer very high yields for users who stake or farm their tokens. Yields can range from 20% to 300% APR. APR refers to the estimated interest return rate per year. 

3. PancakeSwap offers earning opportunities

PancakeSwap also offers other products that are very attractive to users. This includes lottery entries, NFT collections, trading competitions, predictions, and pottery. It’s safe to say PancakeSwap offers a lot of opportunities for its users to create many income streams. 

4. PancakeSwap offers high liquidity

There is an impressive amount of users and a high daily volume.  This means users who stake their tokens can expect quite a good return. 

5. Privileges for CAKE holders

CAKE holders also have significant advantages. This includes the ability to vote on governance decisions, rebates on trading fees, and access to IFO (Initial Farm Offerings). This is a great way to earn cryptos from new projects. 

6. PancakeSwap has a wide range of selections

The platform holds a huge collection of crypto projects and tokens. Users can also get access to new launches through Initial Farm Offerings and have first access to new tokens. There are also NFT collections on the platform to trade or stake. 

Passive income with PancakeSwap

PancakeSwap is a DEX that offers quite many opportunities for average crypto enthusiasts to generate unlimited earning opportunities. PancakeSwap allows you to earn through a feature called yield farming. This is a way for you to earn interest on a staked amount. An investor would use PancakeSwap to stake their tokens into a protocol. Other traders may borrow staked coins to trade.

Let’s look at some of the features they offer.

Farms

In farms, users can stake liquidity pool (LP) tokens to earn rewards in CAKE tokens. You can do this by using the liquidity feature in PancakeSwap to choose a token pair you want to use such as CAKE and Bitcoin. 

The liquidity feature allows you to deposit these tokens in the ratio you decide into liquid pools. In return, you get the LP token, Bitcoin-CAKE from this deposit. After that,  you can take those tokens to the Farm feature and select a liquidity pool group that matches your LP tokens, and stake it to get rewards. 

There will be a suggested APY to state how much interest you will be earning from the stake, but do note that this may change over time! Harvest your tokens whenever you’re ready to take out your profits. 

Syrup Pool

The Pool feature allows you to deposit your tokens such as CAKE that you have earned from farming or even other tokens you might have in your wallets.

Use these tokens as a stake and earn other tokens as rewards!

Lottery

PancakeSwap holds lotteries every day. Like a lottery ticket, players must hold a 4-digit combination consisting of numbers from 1-14. For example, 4-6-7-13. 

Every day, a random combination is generated and the winning player who matches this combination is awarded 50% of the lottery pool. Players are also rewarded if they have two or three numbers that match the combination. If nobody had the winning match, the reward would be rolled over to the next day for a bigger prize. 

PancakeSwap vs. Uniswap

Which is better? The unicorn or the bunny-shaped pancake? 

In most ways, both are quite similar. In fact, PancakeSwap is a clone of Uniswap with a few alterations in its code. However, this is normal as most DeFi protocols tend to be cloned or “forked” which is a term that is used for copying and pasting codes. 

Uniswap and PancakeSwap have pretty much the same protocols and functions. 

Uniswap is an Automated Market Maker (AMM) decentralized exchange built on the Ethereum blockchain. PancakeSwap is built on the Binance Smart Chain blockchain. Uniswap was established much earlier in 2018 while PancakeSwap only came about 2 years later. 

Cost efficiency 

Uniswap has a slight challenge which is the much higher transaction fee as compared to PancakeSwap at 0.3% per trade. 

At the time of writing, Uniswap has a Transactions per second (TPS) of 15 on average while PancakeSwap has a TPS of 50. 

This allows PancakeSwap to charge a lower gas fee averaging around $0.35 per transaction. UniSwap is more expensive at around $100 or more. This makes PancakeSwap more cost-effective. 

Scalability

PancakeSwap is more scalable than UniSwap as it runs on the Binance Smart Chain (BSC) which is more centralized than the Ethereum blockchain. 

Centralization may cause a few issues such as service interruptions because of the lower number of validators. However, since PancakeSwap is so affordable, this con is usually still acceptable to users.  

Transaction speed

PancakeSwap transactions complete within seconds which is faster than UniSwap. Uniswap is known for having slow transaction speeds that can be from several minutes to even hours unless you pay a higher gas fee. 
 

How do I buy CAKE?
(Spoiler alert - it's not from the cakery)

Follow these steps to buy your CAKE token at the most ease: 

1. Open an account on Binance.

You can open a Binance account to buy CAKE. Open an account on the website or via the app and provide verification for your identity. You can use either your email or mobile number to register. 

2. Decide how are you going to buy CAKE.

There are several ways to buy CAKE. You can click on the “Buy Crypto” option on the Binance website which shows available payment options in your country. You can also buy using credit or debit card, bank transfers, P2P trading or even third-party payment. 

3. Place your order

Your order will be booked for one minute at the current price. You must confirm your purchase or the order will be recalculated for the current market price. 

4. Keep your CAKE safe

Once you have purchased your CAKE, store it well in a compatible crypto wallet like Metamask.

PancakeSwap founded by an anonymous group

PancakeSwap was said to be founded by a group of anonymous developers in 2020.

There is now a team working behind the scenes of PanacakeSwap that consists of 12 members who are known as chefs. They each have funny pseudo-names such as Cadbury, Jojo, and Cupcake. 

So, will their names ever be revealed? Likely not, but only time will tell. 

PancakeSwap’s CAKE supply

It was recently announced on the PancakeSwap website that there is a maximum cap of 750M on CAKE which is the governance token of the exchange. 

Deflation aims to be higher than emission by reducing the number of CAKE made per block. The number of CAKE entering the circulation had been reduced from 40 CAKE per block to now 12.75 CAKE. However, the team does not want to do this too frequently so that users will still be incentivized for liquidity.

In addition, PancakeSwap also has deflationary mechanisms which involve a 10% burn for CAKE spent on lottery and other methods of inducing deflation. Check out PancakeSwap’s tokenomics for more information on their deflationary mechanics. 

Various benefits of PancakeSwap

PancakeSwap can be a platform for users looking for income opportunities. The lower transaction fees and faster speeds allow users to have an optimal experience on the website. Besides that, PancakeSwap is also a safe platform to use because it is a non-custodial DEX. This means that your tokens or NFTs are not held in large hot wallets which would indicate centralization.

The platform is also audited by a cyber security firm known as Certik. They have confirmed that PancakeSwap has enterprise-level security.

To date, there are no reports of hacking or lagging with PancakeSwap which seems like a good indicator of security. 

How to use PancakeSwap and earn some extra money

1. Connect a wallet to PancakeSwap. 

You can use the Binance Chain Wallet, Trustwallet, or Metamask which is an Ethereum-based wallet. Do note that there may be extra steps to connect Metamask to PancakeSwap. 

2. Create liquidity

Head to the Farm section under the Earn tab where you can see many pools having different APR rates. Find one that you are interested in and be aware of impermanent loss when choosing a liquidity pair. Once you have chosen a pair such as BNB-CAKE, go back to trade and select liquidity. Here you can choose to create an LP token, BNB-CAKE. 

3. Stake your LP tokens in farm

Stake your LP tokens in the respective pool under the Farm section. This pair will allow you to generate CAKE tokens. You can choose to auto-invest the returns or harvest the CAKE tokens and stake them under Pool.

4. Stake CAKE tokens in pool

Use the Pools feature to stake CAKE tokens to earn other tokens such as USDC, USDT, or other BEP-20 tokens. This way, you get to earn more rewards using the two main features PancakeSwap offers which are Farm and Pool.