What is PancakeSwap?
If you have ever wondered, 'what is PancakeSwap?', this article is here to help.
PancakeSwap is an Automated Market Maker (AMM) decentralised exchange protocol (DEX) built specifically for BEP20 tokens and the Binance Smart Chain. The protocol allows users to swap tokens, provide liquidity, farm and stake native tokens, plus many other cool features.
Created by anonymous developers and launched in September 2020, PancakeSwap has some 2.8 million customers generating total value locked of more than $4 billion (September 2022). The native token of the PancakeSwap platform is CAKE (with a circulating supply of 125 million coins).
Smart contracts/Low fees
To answer the question, 'what is PancakeSwap?', we need to understand it's structure and purpose. At its core, PancakeSwap is an automated and decentralised exchange (DEX) that relies on smart contracts to swap and execute trades rather than a traditional two-party order book system.
PancakeSwap follows the same model as other DEXs, such as UniSwap and SushiSwap. However, because PancakeSwap is built on the Binance Smart Chain, the fees associated with using the protocol are much lower by comparison.
PancakeSwap has a number of interesting features which allow users to gain rewards in a variety of ways. From earning fees for providing liquidity to generating rewards through staking, PancakeSwap is an example of how a modern decentralised cryptocurrency trading exchange should look and operate.
What is PancakeSwap? It is a DEX operating as an AMM, and that means there is no central server and no central point of authority. Instead of order books and corresponding buyers or sellers, users contribute to pools of liquidity that enable other users to trade or swap tokens out of that pool.
Although the PancakeSwap platform has been designed to facilitate BEP20 tokens, users of other tokens, such as Ethereum's ERC20 standard, can use the platform provided they wrap their tokens first.
To start using PancakeSwap, users must first connect their online wallet to the exchange. Any wallet compatible with the Binance Smart Chain BEP20 protocol is allowed, although popular wallets such as Metamask and Binance Smart Wallet seem to work best.
Users must have some Binance coin (BNB) in their wallet to begin with, which will then be used for transaction fees. Once connected, users will be able to start swapping and trading tokens through the application. Check out this Connection guide for further help.
FLIP the CAKE
What is PancakeSwap offering users? It has a number of innovative features which make it very attractive to the modern cryptocurrency trader.
At its core, PancakeSwap is a decentralised exchange and swap platform where users can trade and swap a wide variety of BEP20 tokens. However, users can also help provide liquidity to these markets by adding a token pair to the relevant pool.
By adding liquidity to a pool of their choice (e.g., BNB:CAKE), users are rewarded with LP (liquidity provision) tokens called FLIP and earn 0.17% on all future transactions from traders using this pool. Fees are added to the pool and accrued in real time. They can be reclaimed when the user decides to remove their liquidity from the pool.
Once a user has secured their FLIP tokens, they can access some of PancakeSwap's more advanced features.
By providing further liquidity to any listed pairs and staking their tokens, FLIP holders can earn PancakeSwap's native cryptocurrency CAKE via a process called 'Yield Farming'.
The rewards are calculated from a combination of FARM base APR and LP rewards APR. The total rewards allocated depend on the amount of liquidity in the chosen FARM.
Furthermore, CAKE holders can simply stake their tokens to generate more CAKE via a feature known as Syrup Pools. Choosing between flexible staking or fixed term staking, the user receives auto compounded staking rewards with no deposit-associated fees and can be unstaked at any time.
More CAKE, NFTs and lotteries
As PancakeSwap’s core utility token, CAKE has a variety of uses on the platform. Furthermore, as CAKE can also be bought and sold on the open market, it ensures that interest in PancakeSwap and its native token remain high.
One other use of the CAKE token is Lottery v2.0. Here CAKE holders can win more CAKE prizes by purchasing tickets at a cost of 10 CAKE tokens per ticket. To be a winner, entrants must match four numbers between one and 14 in the same order in which they are drawn to be in with a chance of winning 50% of the entire lottery pool.
PancakeSwap Prediction is a simple prediction market where contestants can win prizes based on their predictions regarding the future price of BNB coin. Each correct guess is rewarded with a proportional share of the payout pool, meaning the more you stake, the bigger your potential win. Transaction fees are set at 3%, while rounds last five minutes.
Anyone looking to generate and trade NFTs can also do this via PancakeSwap's NFT Profile System and NFT Marketplace. For the price of 1.5 CAKE, users can create a personalised NFT which can then be shared with family and friends or traded for other cryptocurrencies or other Binance Chain collectibles.
For those investors looking for the next world-beating application PancakeSwap's IFO (Initial Farm Offering) allows users to purchase project tokens with CAKE. In much the same way as traditional ICOs, some of the hottest Dapps of 2002 were born via PancakeSwap's IFO. With the backing of Binance Smart Chain, it is easy to see why blockchain-based projects like Mines of Dalarnia have achieved massive success.
And finally, no modern decentralised exchange can afford not to offer perpetual futures trading. Partnering with Apollo X, PancakeSwap offers various crypto derivatives without expiration, including perpetual swaps and trades to appeal to the crypto trader looking to use leverage.
As you can see, PancakeSwap is a versatile yet comprehensive decentralised exchange platform showcasing the best of Web3 applications on the market today. As you might expect of one of the world's largest DEX, PancakeSwap has undergone vigorous testing from leading security auditors Certik who have provided a satisfactory report.
This, of course, is cause for comfort for the 400,000 DAO community members, of whom every single one has the right to vote on any proposals put forward by the platform.
If you have ever asked, 'what is PancakeSwap?', then hopefully this has helped. With a reputation stemming from its association with Binance Smart Chain feeding an appetite for innovative products and services, it is easy to see why PancakeSwap continues to go from strength to strength, overtaking more established DeFi offerings such as SushiSwap and UniSwap.
Author: Brendan Beeken
Moni Talks Founder and Chairman Brendan Beeken is an entrepreneur, commercial strategist, investor, and philanthropist. He writes on a wide range of subjects, including cryptocurrency, decentralised finance, blockchain, business advice, and professional wellbeing, for news and business websites, as well as Latest Moni and his personal site, brendanbeeken.com. Brendan draws from his own research and more than two decades of personal experience in business to offer a unique insight, perspective, and commentary on diverse subjects. He is passionate about making the cryptocurrency space more accessible and encouraging safer and more responsible trading and investing. Brendan's LinkTree is https://linktr.ee/brendanbeeken.