Well if you are a beginner or an experienced crypto trader at some point you must have wondered what actually is Pancakeswap? Is it a crypto Exchange or just a Token? You’re not alone, in this article we will talk about what exactly is pancake swap is and go into detail and depth about how exactly does it work, so stick to the end to know all about it and the interesting rewards one has can avail yourself with it.
So starting with the essential question what is pancake Swap…?
PancakeSwap is a decentralized exchange that allows you to trade cryptocurrencies and tokens without a centralized intermediary, keeping custody of your tokens all the while. It is built on automated smart contracts deployed on Binance SmartChain, the blockchain platform run by crypto exchange Binance.
PancakeSwapis the most popular in a long line of food-themed crypto projects, includingSushiSwap, Yam Finance, BakerySwap, and Kimchi Finance.
The platform is designed to allow users to securely trade Binance Coin (BNB) and a massive variety of BEP-20 tokens without relying on centralized services or losing control over their private keys. As a decentralized exchange, all trades on PancakeSwap are automatically executed via smart contracts — completely eliminating counterparty risks.
Although the team behind PancakeSwap is completely anonymous, the platform has been audited by several prominent blockchain security firms — including Certik and Slowest. The platform is also completely open-source since the PancakeSwap website and smart contract code are open to public scrutiny. Nonetheless, it is known that the team consists of more than a dozen members (known as chefs), including two co-leads (Hops and Thumper), and a variety of engineers.
Since the platform launched in September 2020, it has seen dramatic growth not only in the number of users and the liquidity of supported assets but also in the variety of features it offers. Now, PancakeSwap can be considered an entire ecosystem of Defi tools, all of which are built around the platform’s native utility token — CAKE.
Much like the celebrated Uniswap Defi AMM protocol running on Ethereum, PancakeSwap enables users to swap between cryptocurrency assets by tapping into user-generated liquidity pools.
To create said liquidity pools, PancakeSwap offers a plethora of Defi farming opportunities for liquidity providers. The liquidity grab has so far worked like a charm — well over $1 billion in total value locked (TVL) has migrated to PancakeSwap since it opened its doors.
However, unlike Uniswap, PancakeSwap rewards those who stake its native BEP-20token called CAKE. When you stake CAKE, you get SYRUP at a 1:1 ratio. HoldingSYRUP entitles you to 25% of the CAKE emissions distributed proportionally holders.
Like many other DEXs, PancakeSwap is built on an automated market maker (AMM)system, which relies on user-fueled liquidity pools to enable crypto trades. Rather than dealing with an order book and finding someone else who wants to swap the tokens you have for the ones you want, users lock their tokens into a liquidity pool via smart contracts. That allows you to make the swap you want, and users who keep their coins in the pool earn rewards all the while.
PancakeSwapis part of the rising wave of Defi services that enable crypto traders to conduct transactions with trade tokens without a middleman taking a significant cut of the funds. It is one of the largest such DEXs on the Binance SmartChain, although there are DEXs on Ethereum (such as Uniswap) with significantly higher average trading volume.
As described above, token swaps take place via liquidity pools between token pairs. Users are able to exchange one type of token for another without an intermediary, while other users who stake their tokens in the liquidity pools earn a share of the rewards generated by transactions.
PancakeSwapleverages its own utility token is known as CAKE, which is the PancakeSwaptoken.
The CAKE token is used in a variety of different ways within the PancakeSwapplatform, including:
Yield Farming – done through the PancakeSwap farm
PancakeSwap staking
The PancakeSwap Lottery
Voting on Governance Proposals through the Community Governance Portal
It is clear that the CAKE token has a high level of utility but wait there is more than PancakeSwap than just its own, utility token.
Users essentially trade on the platform by drawing liquidity from one or more of the mentioned liquidity pools, rebalancing after a trade is completed. Adding liquidity PancakeSwap is a process where users add liquidity to pools, which participants can do by having assets in a supported wallet like Binance SmartWallet.
Trades that occur here subtract liquidity from one side of the pool and provide liquidity to the other, which changes the pool in terms of its relative values.
These liquidity pools get filled by users who lock their tokens through smart contracts. Transactions, as a result, occur between the trader and the liquidity pool.
Every time a trader makes an exchange, they need to pay a commission, of which a percentage goes to the liquidity providers. Another portion e goes to the project budget, as well as towards CAKE buyback and burn proposals.
However, that’s just one part of the overall PancakeSwap experience. The DEX also lets you stake coins into so-called Syrup Pools that provide growing rewards. For example, you can stake CAKE, PancakeSwap’s native token, and earn even more CAKE just by letting it sit there in the Syrup Pool over time. There’s even an auto-stake option that will re-stake your CAKE at least once per hour, continuously compounding your rewards.
PancakeSwapoffers game-like experiences, such as wagering on whether the price of Binance Coin (BNB) will rise or fall within a limited window of time. It also has a lottery feature that lets users buy a ticket in hopes of winning a major windfall of CAKE, plus the DEX offers a wide array of bunny-themed collectible non-fungible tokens (NFTs) to purchase. There are also initial Farm Offering (IFO) sales that let you buy brand new coins from budding projects.
Binance Smart Chain is growing quickly as developers take advantage of its low fees and speedier transactions compared to Ethereum. In April 2021, Binancerevealed that the platform had executed some 4.9 million transactions in a single day, or three times the amount that Ethereum has ever managed in a day.
PancakeSwap doesn’t have the same level of average daily volume as Uniswap or SushiSwap, Ethereum’s two biggest heavyweight DEXs, but it’s already very popular considering the relatively young age of the Binance Smart Chain.
If Binance’sdecentralized app (app) platform continues to grow and pull in more developers and users alike—and Ethereum’s soaring gas fees and network congestion continue—then PancakeSwap may well put up an even stronger fight against rival exchanges in time.
