Binance Smart Chain’s PancakeSwap became quite popular among DeFi investors, gaining a level of competition with traditional DEX options such as Uniswap and SushiSwap. In this article we discuss how PancakeSwap earned its fame!
PancakeSwap is a decentralized exchange on Binance Smart Chain, one of Ethereum’s top competitors.
The Binance Smart Chain blockchain was created by Binance, a centralized crypto exchange known for being the largest in the world. Binance competes with two different cryptocurrency companies – Ethereum and Uniswap – through PancakeSwap.
If exchange volume grows sufficiently, PancakeSwap can overshadow Binance itself. The PancakeSwap protocol, despite cryptocurrency narratives, is one of today’s largest DeFi protocols and one that new users need to understand.
PancakeSwap’s guide will teach you the basics of how decentralized exchanges and liquidity protocols work, and how you can use each effectively.
It is indeed worthwhile to understand PancakeSwap’s features after comparing Uniswap and PancakeSwap.
What is PancakeSwap? #
PancakeSwap uses Binance Smart Chain, a fast and inexpensive alternative to Ethereum.
By tapping into user-generated liquidity pools, PancakeSwap users can exchange cryptocurrencies, much like the Uniswap DeFi AMM protocol that runs on Ethereum.
Liquidity providers can create said liquidity pools through PancakeSwap’s DeFi farming opportunities. PancakeSwap has so far migrated more than $1 billion in total value locked (TVL) since its opening.
However, unlike Uniswap, PancakeSwap rewards its CAKE token, a native BEP-20 token. You receive SYRUP at a 1:1 ratio when you stake CAKE. You receive 25% of CAKE emissions if you hold SYRUP.
The Revenue Sharing token #
By staking their tokens, SUSHI holders earn xSUSHI, a revenue-sharing token that earns transaction fees from the protocol. Staked CAKE holders receive SYRUP, which allows them to receive rewards paid in CAKE.
The UNI token is utilized only for governance purposes, which is the fundamental difference between the three DeFi protocols. As LPs sought more wealth creation, they migrated liquidity from Uniswap to both Sushi and PancakeSwap.
Token farming by liquidity providers #
PancakeSwap is a pretty straightforward platform for farming LP tokens similar to SushiSwap. Open the Metamask wallet, deposit the assets you own or are willing to supply, and farm them.
Farming with Pancakeswap vs. SushiSwap, however, is more cost-effective because it is cheaper to deposit assets with the former. The Binance Smart Chain is much cheaper to use than Ethereum – but it’s also much more centralized.
Faster transactions + cheaper #
Uniswap and Sushi are also more expensive and slower to use than PancakeSwap. PancakeSwap uses Binance Smart Chain, a high-throughput blockchain built by Binance to compete with Ethereum.
Because BSC is less decentralized than Ethereum, it achieves its scaling prowess in part through its low transaction fees, but that doesn’t seem to discourage customers from taking advantage of it. Trades on PancakeSwap are undeniably better for smaller wallets that can’t quite call themselves crypto whales and who don’t have unlimited funds to spend on gas fees.
For Ethereum users, PancakeSwap is familiar, since the exchange can be accessed using Metamask, just as you do with Uniswap and SushiSwap.
Gamified Lottery Exchange Experience #
Except for its fun unicorn logo, UniSwap is a serious decentralized exchange. It’s also worth mentioning SushiSwap and its Japanese food and spa culture homage.
PancakeSwap, on the other hand, goes a step further with its PancakeSwap Lottery feature. Every day, users deposit a number of CAKE tokens into the lottery, then wait for the winners to be announced.
In general, the more deposits, the larger the pot, and the higher the stakes. The more CAKE you deposit, the better your chances of winning. Users love the Lottery because it is simple yet brilliant, which explains why it is so popular.
How to use PancakeSwap DeFi Platform #
Make sure you don’t get confused by PancakeSwap’s fancy names. AMM stands for Automated Market Maker, but that’s just another word for exchange.
AMMs, such as PancakeSwap or Uniswap, create liquidity for the platform’s exchange function through a decentralized protocol. The decentralized exchange makes it possible for users such as yourself to seamlessly trade tokens by providing liquidity.
PancakeSwap AMM replaces the centralized order book of exchanges like Coinbase and Binance. Users who wish to exchange cryptocurrencies or provide them in exchange for rewards will appreciate PancakeSwap’s functionality.
To get started with PancakeSwap, you’ll need to understand how to connect Metamask to Binance Smart Chain. To get started on PancakeSwap, here is an easy guide.
PancakeSwap DEX #
Use the PancakeSwap decentralized exchange by visiting Pancakeswap.finance and clicking Trade.
There are two options that appear: Exchange and Liquidity. You can toggle the Swap option at the center of your screen by clicking Exchange.
You can now select the inputs for the exchange. Using the drop-down boxes in each line, choose the cryptocurrency you want to exchange. PancakeSwap allows you to trade crypto against AMM liquidity pools instead of an order book.
Due to this, swaps are easy, fast, and flexible compared to a centralized exchange since anyone can create a pair, provide liquidity for it, and thus open up a new market for the DEX.
After you’ve selected the assets you want to exchange, hit the Swap button, confirm the transaction in your wallet, and you’re done!
BEP-20 tokens can only be traded on PancakeSwap DEX. Due to PancakeSwap’s use of Binance Smart Chain, not Ethereum, it is not Ethereum-based. No matter if you hold only ERC-20 tokens or not, the Binance Bridge will allow you to wrap them for use on PancakeSwap.
To debut their cryptocurrency tokens, new projects often create their own pools. If that is not what you are looking for, providing liquidity to an existing pool might be your best option.
As soon as you have selected a pair to provide liquidity for, you can deposit by confirming the transaction. FLIP is a token that represents your stake in the pool, which you receive as a deposit reward.
FLIP LP token holders receive a portion of the rewards every time an exchange is made that taps into their pool’s liquidity. FLIP tokens can be redeemed to unlock underlying assets that have grown in value since they were created.
Playing the PancakeSwap Lottery #
Getting lucky on a crypto trade can sometimes feel like winning the lottery. Wouldn’t it be better to play the lottery? Using your CAKE tokens, you can take part in the PancakeSwap Lottery.
Purchase lottery tickets with CAKE tokens by clicking Lottery. You have a better chance of winning (because you have more tickets, of course) if you spend more CAKE. You win a portion of the overall CAKE pot if you have two or more matching numbers on your ticket.
Lottery sessions happen several times per day – every six hours. As a result, the odds of striking gold stay high.
Conclusión #
PancakeSwap is a decentralized exchange built on Binance Smart Chain, a fast and inexpensive alternative to Ethereum.
Pancake is the top AMM and Yield Farm on the Binance Smart Chain. And while the services it provides investors continue to grow in popularity, new features and improvements being added to PancakeSwap.
There are many competitors trying to copy exactly what pancake swap is doing but with other themes. But this will always have the first-mover advantage.
References:
Shrimpy. (2021, December 20). What Is PancakeSwap? YouTube. https://www.youtube.com/watch?v=UUZl1I_4Gqo&feature=youtu.be
PancakeSwap Intro – PancakeSwap. (2021a, December 20). Pancakeswap.Finance. https://docs.pancakeswap.finance/
