Whether or not youâre into cryptocurrencies and blockchain, you probably have come across PancakeSwap. It may sound like a fun game, but itâs a platform that has seen enormous growth recently. Itâs giving big Ethereum-based exchanges a run for their money with its unique design and features.
With daily trade volume amounting to over $100 million, you can guess that PancakeSwap means business. However, if youâre someone new wanting a piece of the cake (pun intended), this article will help you understand everything you need to before going all in.
Weâll also discuss the similarities and differences between PankcakeSwap and its counterparts, UniSwap and SushiSwap.Â
Disclosure: No content in this article should be taken as financial advice. Investing can be risky, so it is recommended that you consult with your accounting, legal, and tax advisors before engaging in any kind of transaction.
What is PancakeSwap?
PancakeSwap is a decentralized exchange (DEX) based on Binance Smart Chain (BSC) that you can use for swapping/trading BEP-20 tokens, including Binance Coin (BNB) from Binance Exchange.
It relies on Automated Market Maker (AMM), which helps balance the liquidity on either side of the trade. The way this works is that thereâs no matching with another trader as such. Instead, youâre trading against the liquidity pool.
The liquidity pool is made up of all the funds the users of the exchange have put in. In return, they get liquidity provider or LP tokens. In return, they can earn rewards, including part of the trading fee.
So, either you can trade against the liquidity pool or contribute to the liquidity pool, walking away with rewards (which weâll discuss in detail later on).
As a decentralized exchange based on BSC, it doesnât involve a centralized service overlooking the trade. More importantly, the exchanges are done through smart contracts.
PancakeSwap was launched in September 2020 and has since seen immense growth. The team behind it is anonymous, but they are referred to as âchefs.â
This DeFi platformâs native token is called CAKE, which can be used within the platform for a variety of purposes. The CAKE tokens can be used for staking, yield farming, and even for the PancakeSwap Lottery.
PancakeSwap also offers a lot of gamified features like betting whether a token/coin would go up or down in a given time. There are some non-fungible tokens (NFTs) that you can purchase as well. So itâs a pretty well-rounded DEX thatâs taking a little bit of everything from this new decentralized ecosystem of currencies, assets, and protocols.
Why Should You Use PancakeSwap?
The idea of a decentralized exchange isnât new. We already had Uniswap, which is arguably the most popular. However, there has been a rise in the number of DEX simply because of how they work and eliminate the middle man from the whole scenario.
Traditional crypto exchanges like Coinbase are not so decentralized in that they are run by one corporation. On the other hand, DEX is entirely decentralized without any intermediary. So one maintains the ownership of their tokens until they are traded.
Complete decentralization is one major benefit of going with DEX, in general, and perhaps, PancakeSwap. Also, PancakeSwap isnât based on the Ethereum blockchain, which most DEX seem to be based on. Instead, itâs based on the Binance Smart Chain. As its name suggests, it was made by Binance to facilitate DEXs.
Unique Benefits
Decentralization isnât the only reason why you should be using PancakeSwap. The exchange offers some other unique benefits that you may find attractive. Here are some additional unique benefits:
- Remarkably low transaction fee paired with quick confirmation times.
- Very low vulnerability to problems like front-running, which some of the other DEX have routinely faced.
- The AMM model in itself makes PancakeSwap worth investing and using because you donât have to depend on an order book. You donât have to find a trader to trade the coins you have for the coins you want. You can simply do it against the pool, making trading incredibly easy and quick.
Secondary Features
Aside from trading, PancakeSwap also offers a lot of other features. Most of these features revolve around the native token CAKE, which only makes things better for holders of the token. Anytime that users trade or harvest yield on the platform, CAKE is burned as a deflationary measure. Every Monday, PancakeSwap conducts the CAKE token burns.
Another interesting feature is the Initial Farm Offering (IFO) on PancakeSwap which offers users to buy specific new tokens before they are even launched to the public. Some of these projects have been Ditto, Hot Cross, and Soteria.
Staking and LPs on PancakeSwap
If you want to stake tokens in a farm or put them in the liquidity pool, youâll need to move an equal amount of two different tokens. This is how PancakeSwap maintains liquidity for all its tokens. So you can select the pair of tokens and enter the amount (which is the same for both).
Then, youâll earn rewards as token swaps occur from the liquidity pools.
Your LP tokens can be retrieved at any time, and youâll receive the same individual tokens that you initially put in the pool.
All of the other features are also on the left-hand side of the page. You can find the farms, the syrup pools, and the lottery. Again, youâll have to purchase tokens and move them into your wallet first for any inward token movements.
Once you have the tokens on PancakeSwap, especially when you have earned CAKE tokens, you wonât have to move tokens from your wallet again and again.
When you have the Binance Chain Wallet set up, you can also use it for other purposes like buying cryptocurrency on exchanges, both mainstream ones that are centralized and DEX.
Earning Rewards on PancakeSwap
While you can use PancakeSwap for swapping tokens, you can also make money through the many rewards systems it offers. You can literally earn rewards doing nothing but just moving your tokens.
Yield Farming on PancakeSwap
PancakeSwap also maintains yield farms where users can stake their LP tokens and earn rewards. Regardless of the LP tokens, youâll earn yield tokens in CAKE, the native tokens of the DeFi platform.
This is not the revenue or reward youâll earn from getting a portion of the transaction fee. This is different. So itâs essentially an extra reward.
The reward percentage can depend on the farm, but many times users have earned rewards ranging in a few hundred percent of their LP tokens. However, thereâs also the chance of loss as well when staking your tokens in a farm when you consider the overall yield.
Syrup Pools on PancakeSwap
Syrup pools are similar to PancakeSwapâs yield farms. You can receive rewards as CAKE or another type of token by simply staking different BEP-20 tokens in a syrup pool.
Again, the reward percentage can vary by pool. Youâll have to take a more calculated move by evaluating and estimating the potential value of the tokens youâre staking into the pool.
The biggest syrup pool is, of course, for CAKE. However, there are many other BEP-20 pools as well.
PancakeSwap Lottery
The PancakeSwap lottery is perhaps one of the most exciting things about using PancakeSwap because you can earn free CAKE tokens through a lottery. This is not something youâll find elsewhere.
It works the same way a lottery works in the real world, where you have to buy a ticket, and a winner is chosen randomly. In PancakeSwap, you buy a lottery ticket with CAKE (10 CAKE per ticket), which comes to about five bucks based on recent CAKE value.
You can buy as many tickets as you want and if you buy 100 tickets in one go, you can enjoy a discount of 4.95 percent.
Now, hereâs whatâs most interesting about this lottery, thereâs not just one winner. If your ticket matches the four numbers combination entirely, you win 50 percent of the entire lottery pool. Forty percent of the pool goes to the tickets with at least two numbers matching the same order as the winning ticket. These runner-up winners divide the amount equally amongst them.
The Difference Between PancakeSwap vs. Uniswap vs. SushiSwap
The popularity of DEXs is rising rapidly, with new ones popping up frequently. However, Uniswap, SushiSwap, and PancakeSwap remain the most commonly used.
There are similarities and differences between them that may make one more ideal depending on your needs. So letâs talk about each exchange and its unique differences.
PancakeSwap
As discussed already, PancakeSwapâs most unique characteristic, especially when compared with Uniswap and SushiSwap, is that PancakeSwap is based on BSC. While it also uses smart contracts, itâs a little less saturated than Ethereum.
This means that users must configure a crypto wallet to use PancakeSwap so that they can move them to the smart chain.
PancakeSwap also offers many ways for users to earn rewards, like by staking their tokens for yield farming. Thereâs even a lottery where users can win the native tokens.
Uniswap
Uniswap is hands-down the leader of DEX with the largest liquidity pool. Itâs more accessible as it is available for mobile platforms and not just on the web.
While PancakeSwap has come closer to dethroning Uniswap from the top spot, Uniswap still has more users. When comparing with PancakeSwap, the basic difference is that Uniwswap is based on the Ethereum blockchain. In fact, PancakeSwap was initially a clone of Uniswap.
Both Uniswap and PancakeSwap have competing trading volumes on a day-to-day basis. While Uniswap wasnât always cheaper in transaction fees, its fees have recently gone down farther than PancakeSwapâs.
Also, Uniswap has a much simpler interface than either PancakeSwap or SushiSwap.
Another significant difference is that Uniswapâs native token, UNI, is only for governance purposes, unlike CAKE.
SushiSwap
SushiSwap is quite similar to PancakeSwap because itâs also an AMM and has a food-inspired name! But thatâs not where the food inspiration stops; it also has a Japanese restaurant menu-style user interface (UI), which makes it quite unique.
However, the highlighting difference is that SushiSwap runs on the Ethereum blockchain. Its native token is SUSHI, which can also be traded on other centralized exchanges outside of SushiSwap.
As an AMM-based exchange, it also maintains liquidity pools for the exchange, making it easier to trade and benefiting users who keep their tokens in the liquidity pools. Similar to IFOs on PancakeSwap, SushiSwap also allows the launch of new projects through its open-source platform.
How to Use PancakeSwap with Binance
Getting on PancakeSwap is easy, but the challenge is that it doesnât work with fiat currency. You first need a crypto wallet and have a BEP-20 token in it to join PancakeSwap and get swapping.
To use it with Binance, you can use Binance Chain Wallet. So the first step is to get a Binance account and purchase BNB. You can signup with the link below to save 40% on trading fees.
Then, you need to download Trust Wallet and move your BNB into your wallet. You can do all this on the Trust Wallet app.
After moving the BNB to the wallet, you need to convert them to the Binance Smart Chain, which PancakeSwap uses.
To do that, tap on âMoreâ and select âSwap to Smart Chain.â Here youâll have to pay a transaction fee to do this.
Now, you can head to PancakeSwap to get swapping. Youâll find the menu on the left side of the page, where youâll see the option âExchangeâ under âTrade.â From there, you can select the tokens you want to swap from the wallet. Of course, youâll also need to specify with which supported tokens you want to exchange.
The confirmation will need to be done with your wallet, so itâs a secure transaction that only you can complete.
The Bottom Line
PancakeSwap is an emerging DEX that is easily among the top five DeFi applications in the world right now. Its unique features do give it an edge over some of its competitors. The secondary features like pools and the lottery make it ideal for people who simply want to profit by going into crypto.
Itâs also beneficial that its native token, CAKE, is also listed on some major coin exchanges. So it could become a significant crypto token in the future, gaining value and increasing market share.