Every crypto enthusiast knows about UniSwap but some of them are still unaware of Pancakeswap, the number 1 decentralized exchange (DEX) built on Binance Smart Chain. DEXes are shaping into a new platform for trading digital assets i.e cryptocurrencies and have numerous advantages over regular exchanges.
Despite the heavy competition from Ethereum based decentralized exchanges like SushiSwap Crypto Exchange, Pancakeswap successfully made its mark within a year of its launch. But does it hold enough potential to rise and stay at the top of the list?
What’s so special about Pancakeswap crypto that attracts users to trade on its platform? Can it beat Ethereum DEXes? Is CAKE token a good investment? Let’s find the answers to all these questions and forecast the future of Pancakeswap, the number 1 DEX on the Binance Smart Chain.
What is PancakeSwap?
Pancakeswap is an open-source, decentralized exchange built on the Binance Smart Chain (BSC) that supports the buying and selling of BEP20 tokens. Launched on Sept 20, 2020, Pancakeswap became the fastest-growing DEX on the Binance Smart Chain and acquired the number 1 spot as the top DEX in the BSC ecosystem.
It was created by anonymous developers. In 2022, Binance Labs made a strategic investment in PancakeSwap DEX pushing the marketing & development efforts of the project. This makes it an autonomous software running on BSC which is just like SushiSwap running on the Ethereum blockchain.
Binance Chains:
Binance has two operational chains with native token types –
- Binance Chain
- Binance Smart Chain (BSC)
Binance Chain has BEP2 tokens and Binance Smart Chain has BEP20 tokens. Binance own decentralized exchange i.e Binance DEX is built on the Binance chain. Since Pancakeswap is built on Binance Smart Chain, it supports all BEP20 tokens. A user can easily convert the token type (ERC20, BEP2) to BEP20 by choosing the option to withdraw the token from the Binance exchange as a BEP20 token.
Mirror Protocol (MIR) synthetic assets are tradable on Pancakeswap
The trades executed on Pancakeswap are governed by smart contracts thereby eliminating the risk of an error. The best part, it is audited by top security firms like Certik and Slowmist. The team consists of a group of members that calls themselves Chefs.
Binance does not control Pancakeswap Operations
What is PancakeSwap CAKE Coin?
CAKE is the native token of Pancakeswap decentralized exchange. It is a BEP20 token that serves numerous purposes on the exchange that includes Governance, Staking, Yield farming and is the key token for products by Pancakeswap like IFO, Lottery, trading NFT etc. which I will discuss later in this post.
Theoretically, there’s no hard cap to the maximum supply of CAKE tokens. However, the current circulating supply is 250 million tokens which will increase as the platform demand and adoption rate surges.
Remember, Pancakeswap is a decentralized exchange, CAKE tokens are necessary to take part in voting for the governance decisions. For trading, the user needs Binance coin.
User must hold Binance Coin BNB in his wallet to pay for the transaction fee on the Pancakeswap exchange
How does PancakeSwap work?
Pancakeswap is an Automated Market Maker (AMM) that runs on liquidity pools. Users deposit cryptocurrencies on the respective liquidity pools and receive LP tokens (Liquidity Pool).
Users who provide liquidity to run the DEX are known as liquidity providers. Remember, while becoming a liquidity provider, user has to deposit the coin as a pair of two tokens in a 1:1 ratio as available on the liquidity pools. For example, CAKE-BNB is one such pair with its liquidity pool active on Pancakeswap. Once deposited, the system will provide the respective CAKE-BNB LP token.
The LP tokens received by the user represents the share of his deposit in the liquidity pool. These tokens need to be returned to the exchange at the time of reclaiming the deposited tokens.
Whenever a trader place trade on the exchange, he pays 0.25% trading fee, of which 0.17% is added to the liquidity pool as a reward to the liquidity providers. Moreover, LP tokens can also be staked on CAKE Farms to earn more yield while earning transaction fees side by side.
This is how trading fee reward is earned by depositing CAKE-BNB tokens on the liquidity pool –
The platform itself is funded by Pancakeswap treasury which receives 15% of the total trading fee generated that can be further used for the upkeep, maintenance and implementation of approved proposals on the platform.
Head over to our post on Uniswap Exchange (UNI) and read How DEX work as Automated Market Maker.
How to use PancakeSwap Crypto Exchange?
The process of trading BEP20 tokens on Pancakeswap is similar to trading ERC20 tokens on Uniswap and SushiSwap that runs on the Ethereum blockchain. Users need to visit Pancakeswap.finance, click on the Trade button on top of the page and then go to Exchange.
In order to place a trade, the user has to connect the wallet by clicking the relevant option from the list (include MetaMask, Trust Wallet and more) as shown in the image –
Once connected, enter the desirable trade you wish to trade and the panel will show you the estimated swap tokens you will be receiving with the respective trading fee. In the example, I am swapping my BNB tokens in exchange for CAKE tokens.
This is how easily a user can operate the Pancakeswap DEX. Did you realise, you don’t have to create an account and go through the KYC process. No matter where you are, if you have internet and a crypto wallet, you’re all set to trade on Pancakeswap exchange.
PancakeSwap Products:
Pancakeswap offers a variety of products that make you want to be a part of its staking program
1. Yield Farms:
Users can earn rewards by staking their Liquidity Provider tokens (LP) on the yield farms. This is in addition to the yield earned through the trading fee. Every time users stake LP tokens on the numerous yield farms, the reward will be paid back in CAKE tokens.
Remember, yield farming gives better reward compared to syrup pools but it comes with a risk of impermanent loss which will be discussed in Pancakeswap limitations.
The farm can only accept its own exact LP tokens. For example, CAKE-LTC farm will only accept CAKE-LTC LP Tokens.
Get exact LP Tokens by providing liquidity for that trading pair
2. Syrup Pools:
Syrup pool is a simple staking feature by Pancakeswap. Stake your CAKE tokens and earn more CAKE or free tokens of projects built on the Binance Smart Chain as a reward. You can participate in Syrup pools by visiting Pancakeswap.finance
Similar to yield farms, the annual percentage yield (APY) will differ from pool to pool. There’re two important Syrup pools in Pancakeswap –
Manual CAKE:
The name speaks for itself. User needs to harvest and compound their earnings manually since the manual pool won’t be doing it on its own.
Auto CAKE:
Auto CAKE compounds the rewards automatically. CAKE earned will be harvested and then reinvested in the same pool. The user doesn’t have to do anything apart from staking CAKE.
Sharing the difference between these two pools in detail –
Auto CAKE Syrup Pool Fee:
- Deposit Fee
- Unstaking Fee
- Performance Fee
Deposit Fee:
There’s no fee charged at the time of depositing the CAKE tokens to the Auto Syrup Pool
Unstaking Fee:
0.1% if you withdraw (unstake) CAKE tokens within 72 hours else there’s zero unstaking fees. The fee only applies to manual unstaking. The 72 hours timer resets every time the user deposits more CAKE tokens in the pool.
Performance Fee:
2% charged by default on each yield harvest. For 1 CAKE, it will charge a performance fee of 0.02 CAKE
CAKE collected via Unstaking and Performance fees will be burnt to reduce inflation
3. Lottery V2:
Want to test your luck and earn huge CAKE rewards, try Pancakeswap lottery. Each lottery ticket costs $5 USD in CAKE. A user can buy 100 lottery tickets at a time. Each ticket contains 6 random digits between 0 to 9. Visit the Pancakeswap lottery page to participate and win the lottery
As a rule of thumb, more matching numbers account for higher rewards. The number should match in sequence from left to right. Lottery uses Verifiable Random Function (VRF) to draw the final result and maintain the randomness of numbers.
The amount won by the lottery winner will also depend on how many users won the same lottery. For example, the winning amount is 1000 CAKE for 3 matching lottery digits and if you’re the only user who wins this lottery by matching 3 digits out of 6 then you’ll receive 1000 CAKE else if there’s one more user with the same numbers then the reward splits between the two and you will receive 500 CAKE.
Buy lotteries in bulk and get up to 4.95% discount
4. Prediction:
Just predict the future price of BNB, whether it will rise or fall in a 5-minute time frame and win. The users will pool funds in prize pot to participate in the prediction. After the result, the winners will receive the reward from the pool funds and the losers will lose their betting amount.
The winners will be rewarded with BNB tokens, which makes it worth participating in the Prediction if you’re a good trader or analyst. Visit the Pancakeswap Prediction Page to participate.
5. NFT Profiles:
Pancakeswap added a new feature in February 2021, known as NFT profiles. The feature allows users to purchase Bunny NFTs and use it as a profile picture. Users with complete profile details are allowed to be part of special teams that participate in special events which results in earning more rewards. Visit the Pancakeswap NFT page to get your bunny.
6. Initial Farm Offering (IFO):
Pancakeswap allows users to purchase tokens of early stage startups built on Binance Smart Chain in IFO. Users need to provide liquidity to CAKE-BNB pool and get CAKE-BNB LP Tokens which are used to buy the tokens used in the IFO.
To take part in IFO, user must have Pancakeswap profile. Profile provide security to the IFO and makes it fair for every participant. Half of the funds (CAKE tokens) are burnt after the process, reducing inflation and making CAKE a deflationary asset. Visit Pancakeswap IFO Page to participate in an IFO event
PancakeSwap vs Uniswap:
| Parameters | Pancakeswap | Uniswap |
|---|---|---|
| Chain | Binance Smart Chain | Ethereum |
| Native token | CAKE | UNI |
| APY | Very High | Low |
| Transaction Fee | Low | High |
| Speed to Transaction | Very Fast | Fast |
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PancakeSwap Benefits:
Audited and Secured Exchange:
Pancakeswap is a fully audited and approved exchange by top security exchange Certik. This make it a trustworthy platform where users can trade crypto tokens without worrying about the security of the network unlike the initial days of SushiSwap exchange.
Fast Transactions and Low Fees:
Pancakeswap uses Binance Smart Chain that uses BEP20 tokens. Therefore, the fee paid on the platform is much lower in the range of $0.04 to $0.20 and the transaction are settled within 5 seconds compared to it’s competitor Uniswap that charges higher fee that can go beyond $20.
No KYC verification:
The best part of trading on a DEX, user doesn’t have to submit verification documents or create a profile to place a trade on the platform. Users need to connect the wallet and place a trade making it a flexible trading platform.
One Platform, Multiple Rewards:
Pancakeswap has mastered the reward program. It reward CAKE holders and Liquidity Providers by allowing them to participate in Lottery, Yield farming, Syrup pools and IFO. It’s the only exchange that is providing higher APY compared to other DEXes.
PancakeSwap Limitations:
Impermanent Loss:
Liquidity Providers on Pancakeswap can face loss of deposited funds whenever the ratio of tokens inside the liquidity pools become uneven. The risk in higher in yield farming therefore users have to take into consideration of cost benefit ratio.
Not Multichain:
Unlike Curve Finance, Pancakeswap is not multichain and support BEP20 tokens only. This limits it’s ability to support wider pool of tokens though Binance exchance has addressed this issue by allowing users to withdraw tokens as BEP20 from ERC20 tokens.
PancakeSwap Crypto Price:
Please check the latest Pancakeswap Crypto Coin price, shared below –
PancakeSwap CAKE Coin Price Prediction:
The CAKE token debuted at an initial price of around $1.37 during the launch of Pancakeswap exchange in September. After initial volatility, the coin went downhill for sometime and hit at an all time low of $0.25.
After the weak rally, token saw big jump in the early bull run of 2021 which boosted the price around $45 per token. At the time of writing, the coin is ranging between $20-$25.
Given the amazing APY by the platform, it’s not hard to guess that CAKE has potential and the adoption rate of Pancakeswap will surge in the long run. Keeping the technical analysis into perspective, it’s quite possible for CAKE to surpass previously high and hit $50 in the next bull run.
Where to Buy PancakeSwap CAKE Coin?
Buying Pancakeswap is a piece of CAKE, a user can purchase it on the top crypto exchange i.e Binance & Coinbase but the best place to purchase the token is on the Pancakeswap exchange.
Is PancakeSwap Crypto a Good Investment?
Created by anonymous developers, Pancakeswap has become the top decentralized exchange on Binance Smart Chain. On some occasions, it has toppled Uniswap exchange to become the top decentralied exchange by volume within 1 year of launch.
The price of CAKE token has responded very well to the bull run of 2021, reaching ATH of $45 per token before falling back to $0.10 in the market crash. Security audit by Certik has given much-needed credibility to Pancakeswap.
It’s the only exchange that has multiple products which allow users to earn passive income just by staking CAKE or LP Tokens. Moreover, low transaction fee is the cherry on the CAKE which has attracted users on the platform, resulting in daily trading volume hitting beyond $650 million.
If you’re someone who believes DEX to be the future of trading, Pancakeswap should be on top of your list. The future looks bullish as crypto adoption rise over time. CAKE looks tasty and fresh to me. I am positive about Pancakeswap and I encourage you to do your due diligence before investing in this or any other crypto asset of your choice.
This completes my review of Pancakeswap Crypto with price prediction. In the next post I will cover the Sandbox Crypto, Metaverse in the making and 1INCH Coin, the DEX aggregator. If you’re a fan of blockchain technology then please do share this post on your social handles and educate everyone around you. Do remember to subscribe to my YouTube channel for more informative content, released every week.
DISCLAIMER:
Cryptocurrency is a highly volatile market. All the information shared in the post is for knowledge purpose only. By no means, it’s financial or investment advice. Readers are responsible for their own investment decisions and should only invest in cryptocurrency after proper research.
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Paras is a blockchain writer & video creator at Katoch Tubes. In his free time, he loves watching space exploration documentaries & Hollywood movies.