What is PancakeSwap? It surprisingly has very little to do with actual pancakes. This food-themed decentralized exchange has taken the DeFi world by storm. Since 2020, PancakeSwap has emerged as one of the leading exchanges on the Binance Smart Chain (BSC) and has the highest trading volumes in the market. In this article, we’ll take a look at what PancakeSwap is and what you can do with it.
What is PancakeSwap?
Founded by a group of anonymous developers, PancakeSwap is a decentralized exchange (DEX) that lets users trade and earn a variety of BEP-20 tokens. Beyond its unique theme, there are a few other aspects that drive PancakeSwap’s popularity.
First, being one of the largest DEXs running on the Binance Smart Chain (BSC) allows PancakeSwap to offer lower fees and faster transactions when compared to Ethereum-based exchanges. Second, PancakeSwap is built on an automated market maker (AMM) system which allows users to trade directly from liquidity pools. This removes the need to rely on buyers and sellers to trade your coin!
However, for many users, the most appealing part of PancakeSwap is the variety of features it offers. On PancakeSwap users can participate in the following products:
- Syrup Pools
- Yield Farms
- Initial Farm Offerings (IFOs)
- Lottery
- NFT Collecting
- Prediction Markets
These products, as well as PancakeSwap’s entire ecosystem, are built around their native governance token: CAKE.
CAKE - PancakeSwap Token
CAKE is a BEP-20 token that is the beating heart of PancakeSwap’s platform. You can buy CAKE on the PancakeSwap exchange, earn it from Farms and Syrup Pools, or win it in the PancakeSwap lottery. Once you have your CAKE, you can use it across all of PancakeSwap’s products, with the addition of being able to make and vote on governance proposals through the platform’s community governance portal.
The PancakeSwap Exchange
As mentioned before, PancakeSwap is built on an AMM system. This means you can trade BEP-20 tokens directly with liquidity pools, without going through a centralized exchange.
Before you can trade with the liquidity pool, you will need a BNB Smart Chain-compatible wallet and some BEP-20 tokens to trade with. Since liquidity is at the core of an AMM system, you can only trade tokens on PancakeSwap if there is enough liquidity for those tokens. The system relies on users, i.e. you, to provide liquidity and rewards them accordingly.
How do you add liquidity? You can add liquidity by contributing any token pair to a Liquidity Pool. In return, you will receive Liquidity Provider (LP) tokens that represent your portion of the pool and a share in the trade fees for that pair.
Farming on PancakeSwap
PancakeSwap allows users to earn additional yield by staking their LP tokens in Farms. In case you didn’t know, farming (also known as yield farming) generally involves trying to get the biggest return possible from cryptocurrency. This would typically involve either earning interest by lending assets to others or locking the crypto in a liquidity pool. PancakeSwap farming relies on the latter, allowing users to earn CAKE by staking LP tokens in one of its numerous yield farms.
To farm on PancakeSwap you’ll need to have already provided liquidity to a pair of tokens and been rewarded with LP tokens. This serves as a great incentive for users to contribute to liquidity pools. Not only will you be earning the LP tokens, you’ll also be able to use these LP tokens to earn CAKE as a reward for farming.
Rewards for farming can be harvested at any time, and the annual percentage yield (APY) can differ from farm to farm. As a result, many users choose to move their tokens across different farms to accumulate the greatest yield. Though this is an option, it’s necessary to factor in potential impairment losses when harvesting.
If you’re interested in providing liquidity on PancakeSwap, you might want to check out hi’s Giga Pool. With sky-high APYs, this is a great option for staking your well-earned LP tokens!
Staking on PancakeSwap
If farming seems a bit too intimidating, PancakeSwap staking is a simpler way to earn tokens and contribute to PancakeSwap’s liquidity pools.
Unlike farming, which requires you to first earn LP coins, you only need one type of token to start earning via staking. By agreeing to lock your tokens in a liquidity pool for some time, you are rewarded with interest in the form of more tokens. Most pools allow you to stake CAKE and earn additional CAKE, but there are some special pools that let you stake or earn other tokens instead. After the tokens have been staked for some time, you can harvest these rewards by withdrawing the liquidity (unstaking).
When staking, you are able to choose between using an Auto CAKE or a Manual CAKE pool. With the Auto CAKE syrup pool, your stake will be automatically compounded for you, allowing you to just lie back, relax, and earn tokens. This is a great option if you’re interested in some low-effort passive income. As you’ve probably already guessed, the manual CAKE pool is the opposite. This syrup pool requires you to harvest or compound your CAKE by yourself, so takes a little extra work.
📖 Read more about Staking vs. Yield Farming
PancakeSwap NFT Marketplace
Non-fungible tokens (NFTs) are unique digital assets that are stored on the blockchain. Due to their unique nature, NFTs are an increasingly popular method of assigning value to items such as artwork, music, and other forms of digital files.
On PancakeSwap’s NFT Marketplace, you can purchase “Pancake Collectibles” and other NFTs that are listed by collection owners. Owners can then keep, display, and eventually trade these NFTs. In turn, NFT collection creators can earn creator royalties on subsequent trades. To list your collection on the NFT Marketplace, you need to apply via a Google form.
In addition to the marketplace, PancakeSwap also offers NFT profiles. These profiles allow you to use an NFT you’ve previously purchased as a profile picture, choose a name, and potentially join a team. As part of a team, you’ll be able to participate in special events to earn rewards such as CAKE, NFTs, and achievements.
Lottery
One of the more unique products on PancakeSwap’s platform is the PancakeSwap lottery which happens every 12 hours. Playing in the lottery gives users the chance of winning CAKE. One ticket for the PancakeSwap lottery costs around the equivalent of 5 USD in CAKE, but there are discounts if you purchase more than one ticket at a time up to a limit of 100 tickets.
To win the lottery, at least 2 of the numbers on your ticket need to match the winning numbers that are drawn at the end of each round. Tickets contain 6 random numbers between 0-9, which will need to match the drawn numbers from left to right. The more numbers that match, the larger percentage of the lottery pool you will win. Users can win up to 50% of the entire pool if they hit the jackpot! Any CAKE that isn’t claimed in a round will roll over to the next round.
Initial Farming Offering (IFO)
An Initial Farm Offering (IFO) lets you get early access to PancakeSwap’s new tokens as soon as they are added prior to their public launch. You exchange (or “commit”) your CAKE-BNB LP tokens for new project tokens. On PancakeSwap, IFOs are limited-time events, each lasting for only one hour. It is recommended by PancakeSwap to prepare your CAKE-BNB LP tokens in advance before the IFO goes live. Once the IFO is live, you can participate in the sale. There are two sales you can take part in. The first is the Basic Sale, which limits the buy amount per user but does not incur fees to buy tokens. The second is the Unlimited Sale, which incurs a small fee but has no limits to the buy amount.
Hopefully, you now have all the information you need to answer the question ‘what is PancakeSwap?’ Innovative and fun, it’s no wonder PancakeSwap has become one of the most popular DEXs in recent years. I don’t know about you, but we’re very excited to see what features they come out with next!