PancakeSwap is not a joke, despite its amusing name. It’s one of the most popular DApps of all time, with over $100 million in 24-hour trading volume regularly.
It has become by far the most popular DEX on Binance Smart Chain, even overtaking Binance’s own Binance DEX, in less than a year, which can only be described as meteoric growth and adoption.
Here is everything you need to know about pancakeswap
What is Pancakeswap?
PancakeSwap, by far the most popular decentralised exchange (DEX) on Binance Smart Chain (BSC), has become something of a blockchain phenomenon in recent months, thanks to its tremendous liquidity, diverse feature set, and large user base.
Users may safely trade Binance Coin (BNB) and a wide range of BEP-20 tokens without depending on centralised services or losing control of their private keys on the site. All deals on PancakeSwap are automatically completed using smart contracts as a decentralised exchange, entirely removing counterparty risks.
PancakeSwap has been certified by many notable blockchain security organisations, including Certik and Slowmist, even though the team behind it is unknown. The PancakeSwap website and smart contract code are both accessible to public scrutiny, making the platform open-source. Despite this, the team is believed to include more than a dozen people (known as chefs), including two co-leads (Hops and Thumper) and a variety of engineers.
Since its launch in September 2020, the platform has experienced a significant increase in both the number of users and the liquidity of supported assets, as well as the number of functions it offers. PancakeSwap has evolved into a complete ecosystem of DeFi tools, all centred on the platform’s primary utility currency— CAKE.
What is CAKE?
CAKE, PancakeSwap’s native utility coin, is utilised for several functions in the expanding ecosystem. Yield farming, staking, participating in the PancakeSwap Lottery, and making and voting on governance proposals through the platform’s community governance portal are the platform’s key functionalities.
How does it work?
PancakeSwap is an automated market maker, which is a form of DEX (AMM). There are no order books, bid/ask systems or limit/market orders in this system.
Instead, users trading on the platform automatically draws liquidity from one or more liquidity pools, which rebalance after each trade. Trades executed on an AMM, such as PancakeSwap, remove liquidity from one side of the pool and supply liquidity to the other, affecting the weights and relative values of the assets in that pool.
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Users known as liquidity providers (LPs) provide liquidity by adding equal amounts of both sides of a liquidity pool (e.g. BNB/USDC) to increase the total amount of liquidity available. Users receive LP tokens, which represent their share of the pool. To recover their share of the pool, these tokens must be returned. LPs receive a share of the transaction fees produced by any pools they provide in exchange for providing liquidity. Makers and takers pay a fixed 0.25 per cent transaction charge, with the majority of the cost split among the liquidity providers.
PancakeSwap is a decentralised application (DApp) that can be accessed via a Web3 wallet like MetaMask, TrustWallet, or WalletConnect. These wallets are used to communicate with the PancakeSwap smart contracts via the PancakeSwap front-end once they have been set up to support Binance Smart Chain.
According to the official documentation, the treasury funds can be utilised for several activities relating to the platform’s upkeep and maintenance. Salaries, audits, rewards, bounties, hosting, and so on are examples of these.
Updates on Pancakeswap
The platform has undergone many revisions since its inception in 2020, each of which has seen the inclusion of new products and features. In April 2021, PancakeSwap upgraded to V2, providing the developers more freedom to extend the platform’s future capabilities, such as auto-compounding in syrup pools and implementing a referral programme.
Following that, the fee schedule was changed (from 0.2 per cent to 0.25 per cent), with 0.05 per cent of the charge being used to buy CAKE on the open market before burning it to add another deflationary mechanism to the token.
PancakeSwap’s chefs don’t have a definite plan in place right now, but there is a public to-do list (without specific dates). Adding fixed-term staking products, lending and borrowing features, and letting users earn NFTs by performing activities and levelling up are just a few of the big items on the list.
What makes Pancakeswap different?
PancakeSwap, which is built on Binance Smart Chain, takes advantage of a variety of its unique qualities to provide end-users with a good trading experience. For one aspect, it has very cheap transaction costs and short confirmation times, guaranteeing that deals are completed quickly. It also doesn’t suffer from displacement attacks like front-running, making it safer to use compared to blockchains with slower block times than some other AMMs.
PancakeSwap also has a wide number of supplementary features, many of which are useful to CAKE holders. Currently, the most prominent of them are:
- Initial Farm Offerings (IFOs):
PancakeSwap, like an Initial DEX Offering (IDO), lets users acquire tokens from new early-stage businesses before they become public. During an Initial Farm Offering, however, customers trade their CAKE-BNB liquidity provider (LP) tokens for new project tokens (IFO). Half of the total funds (the CAKE side of the equation) is burned as part of the process, providing another deflationary mechanism to the token.
Ditto, Soteria, and Hot Cross are some of the initiatives that have been launched utilising this strategy.
- Yield Farms:
Staking supported liquidity provider (LP) tokens in one of PancakeSwap multiple allows, users, to earn an extra yield. Users may receive a CAKE yield on their LP tokens by participating in a yield farm. This is in addition to the profits made from transaction fees.
The actual APY varies from farm to farm, but it can range from a few hundred per cent to several thousand per cent. Users must, however, account for the possibility of temporary reductions in their overall yield.
- Syrup Pools:
PancakeSwap’s easy staking mechanism is identical to syrup pools. Users can stake a variety of BEP-20 tokens in the platform’s Syrup pools to receive a yield — either in the form of CAKE or another reward token.
The APY for each pool might vary significantly, similar to its yield farms, and users will need to factor in the fluctuating value of their staked assets to get their true yield.
- Lottery v2:
PancakeSwap is unusual among decentralized exchanges in the sense that it also offers a lottery feature — allowing users to buy lottery tickets to potentially take down a large pot of CAKE.
The price for a single ticket is around $5 in CAKE at current rates, but users can receive up to a 4.95% discount by purchasing 100 tickets at once. A total of 40% of the prize pool is allocated to users who match all six numbers on their lottery ticket, with the prize shared equally among winners.
- Prediction Markets:
The prediction market tool on PancakeSwap is a simple feature that allows users to estimate whether the price of Binance Coin (BNB) will climb or fall in the next five minutes. Users pool their funds into a prize pot, which is split among those who accurately anticipate the market’s direction. The bet amount is forfeited by the losers.
- NFT Collectibles
PancakeSwap introduced NFT Profiles in February 2021, allowing users to select an NFT profile photo after purchasing one of the various Bunny NFTs. Users who complete their profiles will be able to join a team and participate in special team activities to gain prizes. Syrup Storm is the most popular team as of July 2021.
Community Governance on Pancakeswap
PancakeSwap is governed in part by the community. This implies that CAKE holders may vote on governance ideas using PancakeSwap’s native voting interface. Some will be proposed by the PancakeSwap core team, while others will be proposed by the community.
Image Credits: BSC News