PancakeSwap Project Insight: A Dex AMM and Yield Farming Project

Pancakeswap has taken the Binance Smart Chain by storm and continues to innovate and bring excitement to the decentralized finance space.

By
Greg Gotsis
on
November 16, 2020
Category:
BSC News

What is PancakeSwap?

PancakeSwap is a decentralized exchange (DEX) on Binance Smart Chain (BSC), which uses permission-less liquidity pools run by algorithms. This process creates what is known as an automated market maker (AMM).

I am sure everyone is familiar with the food token craze that hit decentralized finance (DeFi), whether it's SushiSwap, BakerySwap, PancakeSwap, or the plethora of other projects. With CAKE being a BEP-20 token used on BSC, it allows users to boast fast transactions and fees that trump those on Ethereum. PancakeSwap is the #1 AMM platform on BSC, which puts it in the same field as ERC-20 based AMM's such as Uniswap and Sushiswap.

For those who are unfamiliar with AMM's, they allow people to trade their digital assets against liquidity pools. This is different from traditional markets that use an order book to match buyers and sellers. On AMM's, users can provide their funds and, once deposited, and they become liquidity providers (LP) to the respective pool to receive LP tokens. We will dive into this further below.

Source (July 2021)


Advantages of PancakeSwap

Earn tokens from Pancake Swap

PancakeSwap has its own native BEP-20 token, CAKE, which can be staked––or spread––across Syrup Pools. Syrup pools provide tokens from other BSC projects such as Injective Labs (INJ) and CertiK (CTK), to name a couple.

No Know Your Customer (KYC) policy

Unlike many centralized exchanges, anybody can trade from the hundreds of digital assets with over $100,000,000 in liquidity. Did I mention it's super simple to use? There will be more information below.

Low Fee's & Quick Transactions

As previously mentioned, PancakeSwap runs on BSC, using BEP-20 tokens. BSC has much lower fees than Ethereum, with fees ranging anywhere from $0.04- $0.20, and transactions taking about five seconds on BSC.

PancakeSwap is Secured and Audited by CertiK

PancakeSwap has gone above and beyond and received an audit from CertiK. On top of this, CertiK and PancakeSwap have integrated all the following resources:

--Security Oracle

--CertiK Shield

--DeepSEA

--The CertiK Virtual Machine

More information on CertiK's service can be found on their website.

Tokenomics

It is essential to note that CAKE has an unlimited total supply, and at the time of writing, is still a positive emissions rate. At this point, CAKE is still an inflationary token, but the team has several mechanisms to influence token supply.

Some strategies used by the PancakeSwap team to control token supply are regular token burns built into the lottery system and a new 0.05% burn made of every trade made from the recent PancakeSwap V2 update. 


Yield Farming

Yes, I all know why most of you are attracted to PancakeSwap, yields that you cannot even fathom from centralized finance (banks). They are a couple of different ways to earn yield on PancakeSwap. There are 27 liquidity pools on PancakeSwap at the time of writing, and they offer yields ranging from 5%-310% Annual Percentage Yields (APYs) for supplying liquidity. 

To name a few:

· CAKE-BNB FLIP

· BUSD-BNB FLIP

· ADA-BNB FLIP

· BAND-BNB FLIP

· DOT-BNB FLIP

· EOS-BNB FLIP

· LINK-BNB FLIP

· BAKE-BNB Bakery LP

· BURGER-BNB FLIP

The yield from the LP is rewarded in CAKE. This governance token can also be staked and used to participate in a deflationary lottery. 

When providing liquidity to these pools, it is crucial to understand how AMM's work and the arbitrage opportunities they provide, putting the LP's at risk of Impermanent Loss (IL). This can be exceptionally risky when pooling un-correlated assets and have high volatility, so it is essential to understand the risks associated.

Yield can also be generated through staking CAKE tokens. CAKE can be staked in the SYRUP pools that average about 500% APY at the writing time. As mentioned previously, you can stake CAKE to earn INJ, CTK, CAKE, and even TWT (TrustWallet token).


Accessing PancakeSwap

To access PancakeSwap, you must use one of the wallets below. For this guide, we will show how to create a custom network in a Metamask wallet and connect it to BSC.

Source

If you are unfamiliar with navigating Metamask, follow this tutorial about setting up a Binance Smart Chain wallet on MetaMask. Remember to keep your account safe and never share your seed phrase.

Once completed, you will be able to access PancakeSwap and begin swapping, staking, and providing liquidity.


Once liquidity is provided, simply navigate to the farm tab, select your respective pool, approve the FLIP tokens, and begin farming.

To stake CAKE, navigate to the SYRUP POOL tab and approve the contract, and then stake CAKE to the respective pool.

What's Been Happening?

The team behind PancakeSwap has been up to quite a bit since they began in late 2020. The most significant updates consist of the Initial Farm Offering's, Lending & Borrowing, Margin Trading, the NFT Profiles, and Governance. 

The team recently completed the version two update for their lottery and the entire DEX. Their lottery system has integrated the Chainlink VRF to have a provably fair system. 

The governance process has been busy as of late. The Pancake Community has been looking for many ways to improve by adding more assets and farms, adjusting yields, and dictating burns.

Source

Overall Thoughts

PancakeSwap is the most used AMM and farming projection on BSC. It boasts a TVL of over $9 Billion and a daily volume of over half a billion dollars. The DEX currently has over one million Twitter followers. It is the largest DEX on BSC and the second in all of DeFi. 

PancakeSwap will continue to provide high volume and lots of liquidity to the BSC, especially as the world of DEFI expands. DeFi on BSC is a massive alternative as it allows users to participate DeFi while not worrying about exorbitant fees, which can be seen on Ethereum. 

Overall, the DeFi space is rapidly expanding both on Ethereum and BSC, and PancakeSwap has built itself a name in the room where it continues to innovate. The team has plans to develop itself further and bring more innovation to both DeFi and BSC making it a project worth paying attention to.

Where to find PancakeSwap: Website | Twitter | Medium | GitHub


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Greg Gotsis

Greg (GoonTrades) is BSC News' Chief Editor and is also a writer for the team. Currently enrolled as an economics major, he finds himself as a cryptocurrency researcher, writer, and technical trader.

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