PancakeSwap Finance is like Uniswap a decentralized exchange (DEX) built on Binance Smart Chain (BSC). This DEX has become quite popular among decentralized finance (DeFi) investors and is now competing with Ethereum-based DeFi giants like SushiSwap.
Sometimes ago, Ethereum was the unrivaled king of DeFi. But as the DeFi activity on Ethereum grew, high gas costs and already-present low scalability problem forced the next-generation of projects to look elsewhere. So other smart contract blockchains started to take root and as a result, comparable DEXs are springing up on other public chains.
The BSC was developed by Binance, the leading cryptocurrency exchange. The mainnet went live in September 2020 and gained a lot of traction in the DeFi space, cementing itself as the leader in LTV on BSC, and PancakeSwap plays a key role in this ecosystem. Let’s take a look at this exchange and all it has to offer.
What is PancakeSwap Finance?
PancakeSwap is a decentralized exchange with an automated market maker (AMM) model for swapping BEP-20 tokens. The project was launched in September of 2020 by a group of anonymous developers. Just like other AMM-based DEXes, users trade against a liquidity pool and without maintaining orderbooks. PancakeSwap stands out for its security as it has been audited by CertiK.
In addition to earning by providing liquidity to PancakeSwap’s pools, staking and Farming, users can also try their luck with lotteries and trade NFTs. The platform’s native token, CAKE, is a BEP20 token whose primary function is to incentivize the provision of liquidity to the exchange, in addition to serving as a reward in many of the pools and farms.
CAKE can be used to enter a lottery on PancakeSwap. Users can also win non-fungible tokens (NFT) that can be traded for CAKE or kept in a wallet. So PancakeSWAP offers features different than other traditional DEXes. So it will be worth writing about these features.
What features does PancakeSwap have?
As we can see, PancakeSwap is a very comprehensive platform, which offers a great variety of alternatives for all those who want to generate profits thanks to cryptocurrencies. Let’s take a closer look at each of its features.
PancakeSwap Token: CAKE
PancakeSwap Exchange
As we have seen above, PanckaeSwap is a decentralized exchange (DEX) that uses an Automated Market Maker (AMM) to facilitate token trading. Users provide liquidity to PancakeSwap pools just by connecting a Binance Smart Chain-compatible wallet.
Users can swap both BEP20 and ERC20 tokens on PancakeSwap. ERC20 tokens are first wrapped using Binance Bridge to turn them into BEP 20 tokens. When a user makes a token swap (trade) on the exchange, he pays a 0.25% trading fee. Of this 0.25%, 0.17% is returned to liquidity pools in the form of a fee reward for liquidity providers. 0.03% is sent to PancakeSwap Treasury and 0.05% towards CAKE buyback and burn.
Yield Farming
Accumulating PancakeSwap’s CAKE token is possible through the process of staking Tokens. When you contribute liquidity to a pool where trades occur, you earn CAKE as a reward.
Referred to as Yield Farming, this method stands out as a primary avenue for users seeking passive income on PancakeSwap. However, it’s crucial to emphasize that these rewards are not devoid of risks. Engaging in providing liquidity exposes you to impermanent loss, as well as permanent loss.
Syrup Pools
Syrup Pools offer the easiest route to earnings on PancakeSwap, providing a straightforward way to accumulate CAKE or other tokens while you’re not actively engaged. Unlike the more intricate process of farming in PancakeSwap’s Yield Farms, Syrup Pools simplify the earning process by requiring users to stake a single token, usually CAKE, to initiate the income generation.
Initiating staking in Syrup Pools involves straightforward steps. IFO (Initial Farm Offering) CAKE ensures automatic compounding of rewards, where earned CAKE is harvested and reinvested in the same pool. Additionally, users can accrue IFO Credit during the calculation period. Meanwhile, Auto CAKE and Manual CAKE offer distinct options for reward compounding, with Auto CAKE handling the process automatically, while Manual CAKE requires users to manually harvest and compound their earnings.
PancakeSwap Lottery
CAKE tokens can be used to enter a lottery on PancakeSwap. Each lottery session takes 6 hours. Users can purchase a ticket with their CAKE between draws. According to the documentation, this ticket costs approximately $5 in CAKE.
There is no overall limit for a single user lottery entry limit, but only 50 can be bought at one time. One ticket will give users a random 4 digit combination with each digit being between 1-14, e.g. “1-9-3-2”.
If all four numbers of tickets match with 4 winning numbers in exact order, the ticket holder receives 50% of the entire lottery pool or split the pot if more than 1 winner. If 3 number matches in exact order, a winner wins or splits 20% of the pot. If 2 number matches, the ticket holder receives 10% of the pot. The remaining 20% of the lottery pool is burned.
PancakeSwap Prediction
In PancakeSwap, users can earn rewards by predicting BNB’s price will rise or fall. Users predict if the price of BNBUSDT will be higher or lower than it was when the 5-minute LIVE phase starts. If their prediction is is correct at the end of the 5-minute LIVE phase, you get the accumulated prize pool.
But the PancakeSwap prediction game is not free. Users have to commit some amount of their BNB holding to play this prediction game. If their prediction goes wrong, they lose money.
Initial Farm Offering (IFO)
Initial Farm Offerings (IFO) is a fundraising model within the realm of decentralized finance (DeFi), specifically designed to secure capital through the farming function. As a successor to the initial coin offering (ICO) model, which traditionally funds cryptocurrency development, IFOs allow projects to raise funds by allowing investors to participate in pre-sale events organized by decentralized exchange platforms (DEX).
In this case, PancakeSwap meticulously screens participants and submits a selected list of project proposals for consideration by investors. Although tokens acquired through IFO campaigns are subject to market fluctuations, investors can earn good returns by having early access to projects with a lot of potential.
PancakeSwap NFT Profiles
PancakeSwap supports personalized profiles for users. These profiles allow users to choose their own name, join a team, and choose from NFT profile images they have collected to use as their profile’s display picture.
Creating an NFT profile costs a total of 1.5 CAKE. After creating a profile, users can join teams where they can participate in any special team events when they happen.
Conclusion
Pancake is a UniSwap and SushiSwap-like DEX, but apart from traditional DEX products, it has many other revenue generating tools such as prediction games and lottery tickets.
ERC20 token holders can use PancakeSwap and take advantage of the BSC’s lower fees and high performance. Projects like PancakeSwap show that Ethereum now has strong competitors in DeFi.
Important Links
- Website: https://pancakeswap.finance/
- Documentation: https://docs.pancakeswap.finance/
- Twitter: https://twitter.com/PancakeSwap
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