PancakeSwap is a Binance Smart Chain-based decentralized exchange launched by an anonymous team of developers. The platform is similar to the Ethereum-based SushiSwap, including community governance, opportunities to farm liquidity provider tokens, all while incorporating features so you can earn rewards.
Having launched on September 20, 2020, PancakeSwap has become one of the most recent decentralized exchange (DEX) to be named after a food. It’s main use is for swapping BEP-20 tokens. Binance Smart Chain, which is the open source blockchain and Ethereum fork launched by Binance, enables the creation of smart contracts and the staking mechanism for BNB. In order to do so, Binance’s development team created the BEP-20 token standard.
As the most used automated market maker for yield farming on staking on the Binance Smart Chain, PancakeSwap offers a simple to use interface that resembles those of other popular DEXs. Accepted and promoted by the Binance Accelerator Fund, PancakeSwap is a simple to use platform that allows you to loan your digital assets to liquidity pools. In return, you receive liquidity tokens that can then be staked to earn more profits.
How Does PancakeSwap Work?
PancakeSwap, which was audited by CertiK, is an automated market maker (AMM), which allows digital assets to be traded sans permission and automatically by using liquidity pools rather than a traditional market of buyers and sellers. So, while you can trade digital assets on the platform, there isn’t an order book where you’re matched with another trader.
Rather, users trade against a liquidity pool, which contains users’ funds. Users deposit funds into the pool, and then receive liquidity provider (LP) tokens in exchange, which can be used to reclaim their share, including a portion of the trading fees. You can trade BEP-20 tokens or add liquidity and earn rewards.
Farming and Staking on PancakeSwap
PancakeSwap enables you to farm its governance token CAKE. Deposit your LP tokens to lock them up in a process that rewards you with CAKE. Some of the LP tokens you can deposit include:
- CAKE – BNB LP
- BUSD – BNB LP
- BETH – ETH LP
- USDT – BUSD LP
- USDC – BUSD LP
- DAI – BUSD LP
- LINK – BUSD LP
- TWT – BNB LP
Once you’ve deposited funds to receive LP tokens, and have used them to farm CAKE, you can stake your CAKE and earn other tokens through special staking pools. Check out the pools available on PancakeSwap here.
Once you visit PancakeSwap, at Pancake.Finance, many features are inaccessible until you click on ‘Unlock Wallet.’ Click on it, and you’ll have a few options to connect, such as MetaMask, Trust Wallet, WalletConnect, Binance Chain Wallet, and other options.
Once set up, unlock your wallet for additional options and information. It is time to add liquidity.
To farm CAKE, you need to first add liquidity to the exchange. Navigate to Trade on the sidebar on the left, then click on Liquidity, hit Add Liquidity, and select the token pair that you want to deposit. Also, make sure you know about impermanent loss before adding liquidity to a pool.
Impermanent loss refers to when the price of your tokens changes compared to when you deposited them into a pool. The larger the change, the bigger the loss.
‘FLIP’ tokens are PancakeSwap’s liquidity provider (LP) tokens. PancakeSwap farmers lock up their LP tokens and earn further rewards in the process. Once a staker deposits funds into a PancakeSwap liquidity pool, earning LP rewards and using them to farm the Pancake token (CAKE), users could stake their CAKE tokens by locking them up to receive more CAKE.
Pancake Swap Fees
PancakeSwap has low fees which are often a fraction of the cost of Ethereum-based AMM’s such as Uniswap and SushiSwap. If you provide liquidity to PancakeSwap pools, you receive ‘FLIP’ liquidity provider (LP) tokens along with any trading fees accrued. Traders pay 0.2% fee of which 0.17% is allocated to liquidity providers (LPs) while the remaining 0.03% are burned by PancakeSwap Treasury.
When you are ready to stake your LP tokens to earn CAKE, navigate to the Farms tabs. Select the option that matches your LP tokens. In order to move the BEP-20 tokens, you’ll need to click Approve Contract to confirm the transaction and display a fee. Now you can select the amount you want to stake and confirm it.
This page will tell you how much CAKE you’ve earned. If you want to harvest your rewards at any point, click on Harvest and confirm the transaction. If you want to farm CAKE, then you’ll need to add liquidity to the PancakeSwap exchange pool.
One you select the token pair you want to deposit, you can begin farming CAKE tokens. Withdrawals must be approved for BEP-20 tokens before PancakeSwap can withdraw them for you.
You’ll then be prompted via a popup displaying the transaction amount and any fees. To stake CAKE, transfer some Binance Coin (BNB) to your Binance Smart Chain (BSC) BEP-20 address for future transaction fees.
Upon the confirmation of your transaction, select how much you want to stake, and confirm the transaction. You can view how many CAKE rewards you have earned and harvest any newly awarded tokens. CAKE tokens can then be staked to earn more CAKE. Liquidity providers earn 0.17% of all PancakeSwap transaction fees, as well as FLIP tokens, which can also be staked.
Once you’ve got CAKE, go to the Pools tab, and you’ll be presented with the pools where you can stake your CAKE.
Approve once again the withdrawal of your tokens. Hit ‘Approve CAKE’ to do so. When that has been approved, you’ll need to select the amount of CAKE you want to stake. Now that the CAKE has been staked, you’ll be earning the reward token of the pool passively. If you’d like to cash out your rewards, click on Harvest.
The PancakeSwap treasury provides funding for further development of the network. 0.03% of all trading fees go to this treasury. The treasury burns tokens in accordance with market conditions.
PancakeSwap also allows you to enter a lottery with your CAKE token. Lottery sessions take 6 hours. One ticket costs 10 CAKE, giving you a random four-digit combination of numbers between 1 and 14. In order to win the jackpot, which is the 50% of the entire lottery pool, the numbers in your ticket need to match all four numbers in the same position as the winning ticket.
If you don’t match all four, you can also win rewards if two or more of your numbers are in the same position as the numbers in the winning ticket.
You can also win special NFTs on PancakeSwap. If you win an NFT, you can trade it for the CAKE value it represents or keep the cutie in your wallet as a collector’s item. In order to have a chance to win, you can register to be one of the randomly selected winners. Check out the Pancake.Finance NFT Page for upcoming opportunities.
Initial Farm Offerings (IFO) allow users to acquire newly launched tokens through yield farming. By committing LP tokens from a supported pool on PancakeSwap, you gain access to the sale of a newly launched token. All of the current IFOs happening on PancakeSwap are listed on the DEX’s IFO page.
The Pancake Token
The Pancake token (CAKE) was launched in September 2020 on the Binance Smart Chain (BSC). CAKE is a BSC-native BEP-20 tokens designed to incentivize liquidity provision to the PancakeSwap platform. CAKE doesn’t have a maximum supply, and tokens are regularly burned to reduce the supply.
The Binance Smart Chain was developed to streamline the action and provide a more cost-effective alternative to users.
Users also have access to new tokens. PancakeSwap allows users to transfer USDT, BTC, BUSD, and ETH from the ETH chain to the BSC chain using deposit features. There are three ways to get funds onto BSC, including via a centralised exchange (CEX) that supports BEP20, via Binance Panama Canal (their central bridge), and via DEX provided bridges, which offer their own representations of Ethereum ERC20 assets
PancakeSwap provides familiarity because BSC is an Ethereum Virtual Machine Compatible chain, which means it’s possible to use existing Ethereum wallets just by changing RPC Servers. For this reason, the platform can connect to popular wallets, such as Trust Wallet, TokenPocket, WalletConnect, MathWallet, and MetaMask; the latter of which was built to support BEP-20 tokens alongside ERC-20 tokens.
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