Project Insight: PancakeSwap

What is PancakeSwap:

PancakeSwap is the leading multichain Decentralized Exchange (DEX) across Decentralized Finance (DeFi). Since establishing itself as one of the first DEX on BNB Chain in November 2020, PancakeSwap has become the top protocol in all of DeFi with a suite of innovative products and a powerful community.

PancakeSwap landed during the end of DeFi Summer, alongside other famous projects like SushiSwap, BakerySwap. With CAKE, the native token of PancakeSwap, deployed as a BEP-20 token via BNB Chain, it allows users to boast fast transactions and fees that have made it the most used DEX around.

PancakeSwap is the number one Automated Market Maker (AMM) platform on BNB Chain, which puts it in the same field as ERC-20-based AMMs such as Uniswap and Sushiswap. The DEX uses permission-less liquidity pools run by algorithms and this process creates what is known as an automated market maker (AMM). 

For those who are unfamiliar with AMMs in DeFi, they allow people to trade their digital assets against liquidity pools. This differs from traditional financial markets that use an order book to match buyers and sellers. On AMMs, users can provide their funds and, once deposited, become liquidity providers (LP) to the respective pool to receive LP tokens. 

Key Features Advantages of PancakeSwap

Earn tokens from PancakeSwap

PancakeSwap has its own native BEP-20 token, CAKE, which can be staked––or spread––across Syrup Pools. Syrup pools provide tokens from other notable BNB Chain projects. Every day PancakeSwap emits hundreds of thousands of CAKE tokens but these tokens are a great way for users to earn passive income in various ways.

The CAKE token has had a volatile history, as with most cryptos. The token has seen highs over $40 but has recently been living below the $10 mark. The token did maintain value better than Ethereum and Bitcoin in the latter half of 2022.

No Know Your Customer (KYC) policy

Unlike Centralized Exchanges (CEX), anybody can trade 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 Fees & Super Fast Transactions

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

The speed on the multichain options of Ethereum and Aptos is also very fast. For example, PancakeSwap's users can take advantage of Aptos transaction speeds that process 100k tx per second, while Ethereum’s speed comes with its robust security. The fees on both Aptos and Ethereum are negligible and vary. 

PancakeSwap also has one of the fastest ZAP features in DeFi. Zap was built by PancakeSwap to make adding and removing liquidity from PancakeSwap easy for all levels of users. With Zap, liquidity providers on PancakeSwap can add liquidity with a single token in the trading pair of their choice. 

Multichain Interoperability

2022 was a big year for PancakeSwap as the project went multichain. With the help of Celer Network’s C-Bridge technology, PancakeSwap has been able to successfully bridge its Decentralized application (Dapp) to Ethereum and Aptos. And using the CAKE Bridge, users can flip their tokens between Aptos and BNB Chain with ease.

PancakeSwap currently dominates both BNB Chain and Aptos, with over 50% of the Total Volume Locked (TVL) on both chains. The Ethereum integration is a much harder hill to climb, where PancakeSwap retains a minor market share.

PancakeSwap is Secured and Audited 

PancakeSwap has gone above and beyond and received audits from top security protocols like  Slowmist, Peckshield, and CertiK. PancakeSwap has also participated in several bug bounty‍ programs to help protect user funds. 

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Tokenomics

The CAKE Chefs worked extremely hard to get the token to where it is today. After starting out inflationary and with an unlimited supply, the token battled through market adversity and to maintain the market share it has today.

It is essential to note that CAKE now has a total supply of 750M across all blockchains, according to the v2 tokenomics. At this time, there are over 285,000 new CAKE tokens added to the supply every day. 

The current supply of the CAKE token can be tracked on their website. There is a current circulating supply of over 160 Million CAKE. There have also been more burned tokens to date than in total supply: 700 Million. 

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. 

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Yield Farming

One of the main reasons why most users are attracted to PancakeSwap is yields that you cannot even fathom from centralized finance (banks). They are a couple of different ways to earn yield rewards on PancakeSwap. After beginning with just under thirty pairs, there are dozens of liquidity pools on PancakeSwap. They also offer Annual Percentage Yields (APYs) ranging into the hundreds for  for supplying liquidity and working in boosts. 

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 and sometimes other tokens. The CAKE 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 AMMs work and the arbitrage opportunities they provide, putting the LPs 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. Less than twenty of these staking pools exist, and they are usually on a rotation. Staking proved extremely valuable at the start of PancakeSwap, with APYs soaring around 500%, but now average about 20-30% APY at the writing time. As mentioned previously, you can stake CAKE to earn tokens like INJ, CTK, CAKE, and even TWT.

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Pancake Non-Fungible Tokens (NFTs)

In late 2021, PancakeSwap ventured into the world of Non-Fungible Tokens (NFTs). ‍The team has developed a marketplace to launch and sell NFTs that has maintained a stronghold on BNB Chain. The two main collections have been released by the developers from PancakeSwap: Pancake Squad and Pancake Bunnies. Made by artist Cecy Meade, the Squad NFTs are some of the most popular and highest prices on BNB Chain, Each collection has been some of the hottest NFT releases on BNB Chain, with more collections on the way.

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Accessing PancakeSwap

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

If you are unfamiliar with navigating Metamask, follow this tutorial about setting up a BNB 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.

Overall Thoughts

PancakeSwap is the most used AMM and farming projection on BNB Chain. It boasts a TVL of over $2 Billion and a daily volume of nearly a quarter-billion dollars. The DEX currently has over one million Twitter followers. It is the largest DEX on BNB Chain and the second in all of DeFi. 

PancakeSwap will continue to provide high volume and lots of liquidity to BNB Chain, especially as the world of DEFI expands. DeFi on BNB Chain 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, 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 BNB Chain making it a project worth paying attention to.

Where to find PancakeSwap:

Website | Twitter | Medium | GitHub