PancakeSwap is a popular decentralized finance (DeFi) platform on the Binance Smart Chain, offering users token swapping, staking, and yield farming with low fees and high-speed transactions. This is your ultimate Pancakeswap guide.
- PancakeSwap is a leading decentralized finance (DeFi) platform with more than 3 million users
- As a DEX, it is similar to Ethereum’s Uniswap, except that it runs on Binance Smart Chain and enables users to swap BEP-20 tokens without an intermediary
- PancakeSwap has its own native token $CAKE, which can be used on the platform for various benefits
Decentralized exchanges (DEXs) mark a significant shift from the conventional setup of popular centralized cryptocurrency exchanges. These platforms operate without the need for an intermediary, offering a more direct and autonomous trading experience. A large number of these DEXs find their foundation on the Ethereum blockchain, which is widely recognized as the epicenter of decentralized finance (DeFi) activities. However, not all DEXs follow this Ethereum-based norm. A prime example is PancakeSwap, which diverges by being built on the Binance Smart Chain. This strategic choice not only differentiates it from its Ethereum-based counterparts but also brings a notable benefit: considerably lower trading fees. By opting for the Binance Smart Chain, PancakeSwap caters to users who seek the autonomy of DeFi without the higher costs typically associated with Ethereum’s network, thus offering an efficient and cost-effective alternative in the dynamic world of decentralized finance.
What is PancakeSwap?
At its core, PancakeSwap is a decentralized exchange (DEX), standing apart from centralized counterparts like Binance and Coinbase. Unlike these conventional platforms operated by single entities, PancakeSwap eliminates the need for an intermediary in trading, empowering users with direct control over their transactions. Set against the backdrop of the Ethereum-dominated decentralized finance (DeFi) landscape, PancakeSwap takes a different route by being built on the Binance Smart Chain. This strategic choice not only distinguishes it from the plethora of Ethereum-based DEXs but also results in significantly lower trading fees.
PancakeSwap differentiates itself by focusing on BEP-20 tokens, leveraging Binance’s robust technology. It’s not controlled by Binance but was developed by anonymous creators, bringing a layer of decentralization true to the ethos of blockchain. Utilizing an automated market maker (AMM) model, it allows for seamless trading against liquidity pools instead of traditional order books..
Moreover, PancakeSwap extends beyond just trading. It offers features like Syrup Pools for staking coins, providing users with the opportunity to earn rewards by staking its native token, CAKE. This is complemented by game-like experiences, including wagering on Binance Coin (BNB) price movements and a lottery system where users can win CAKE. Additionally, PancakeSwap presents a realm of bunny-themed collectible non-fungible tokens (NFTs) and Initial Farm Offerings (IFOs), allowing users to purchase new coins from emerging projects.
Fun fact: In line with its playful branding, PancakeSwap uses farm-related terms for its features. For example, users can “farm” liquidity provider (LP) tokens, and “syrup pools” are available for staking.
Who created Pancakeswap?
PancakeSwap’s origins are intriguingly anonymous. Created by unknown developers, this decentralized platform was launched in September 2020. Despite its anonymity, PancakeSwap quickly rose to prominence in the DeFi space, largely due to its innovative features and user-centric design. This choice was significant due to BSC’s faster and more cost-effective transaction capabilities, especially when compared to Ethereum’s slower and pricier transactions during the 2020 DeFi boom. Ethereum, hosting most DeFi applications at the time, struggled with high demand and consequent transactional delays and costs.
PancakeSwap further set itself apart with a competitive swap fee of just 0.2%, undercutting the industry norm of 0.3%. This low-fee strategy contributed to its swift growth in trading volume and total value locked (TVL), propelling it to become one of the top decentralized exchanges by February 2021.
How does Pancakeswap work?
PancakeSwap operates on the Binance Smart Chain (BSC), distinguishing itself from many DEXs that are based on Ethereum. The choice of BSC is strategic, offering users faster transaction speeds and considerably lower fees. This decision underpins much of PancakeSwap’s appeal, as it addresses two critical pain points in the crypto trading world: cost and efficiency.
PancakeSwap utilizes an Automated Market Maker (AMM) model, which is a departure from the traditional exchange setup. Instead of using an order book where buy and sell orders are matched, the AMM model employs liquidity pools. These pools are essentially collections of funds locked in a smart contract. Users, or liquidity providers, deposit their funds into these pools and, in return, receive liquidity tokens. These tokens can later be redeemed for a portion of the trading fees or used in other yield-generating activities on the platform.
- Swapping, staking, yield framing: Trading on PancakeSwap involves the exchange of BEP-20 tokens, the standard for BSC. Users can swap tokens directly from their wallets, facilitated by the liquidity in the AMM pools. Beyond simple token swaps, PancakeSwap offers staking and yield farming opportunities. Users can stake the platform’s native token, CAKE, in Syrup Pools earning rewards over time. Yield farming, another popular feature, allows users to earn CAKE by providing liquidity to selected pools. But more about that below.
PancakeSwap also provides an array of playful and interactive features. Users can engage in prediction games, betting on whether the BNB price will increase or decrease within a specified timeframe. Additionally, there’s a lottery element where participants can purchase tickets for a chance to win a substantial amount of CAKE, the platform’s native token. The decentralized exchange (DEX) also presents a diverse selection of bunny-themed collectible non-fungible tokens (NFTs) for acquisition. Moreover, PancakeSwap hosts Initial Farm Offering (IFO) events, offering opportunities to acquire new coins from emerging projects.
CAKE, native token of PancakeSwap ecosystem
At the heart of PancakeSwap’s ecosystem lies CAKE, its native utility token, playing a pivotal role in the platform’s functionality and community engagement. Here’s a breakdown of CAKE’s key aspects:
- Utility and Functionality: CAKE is integral to the PancakeSwap ecosystem. Its uses include:
- Trading: As a BEP-20 token, CAKE is actively traded on PancakeSwap.
- Staking and Yield Farming: Users can stake CAKE in Syrup Pools for rewards, and engage in yield farming to earn more CAKE.
- Governance: Holding CAKE grants users voting rights in governance decisions, influencing the platform’s future direction.
- Lottery and Games: CAKE can be used to enter PancakeSwap’s lottery, and participate in prediction markets and other platform games.
- Emission and Burning: PancakeSwap employs a unique mechanism where a portion of CAKE is regularly burned to manage inflation. This helps maintain its value against the continuous creation of new tokens.
- Rewards System: CAKE holders enjoy various incentives, like earning additional CAKE through staking and yield farming, aligning with the platform’s community-focused ethos.
- Decentralized Development: Despite Binance Smart Chain’s affiliation with the centralized Binance exchange, PancakeSwap and CAKE were developed independently by anonymous developers, maintaining the decentralized nature of the platform.
- Binance Smart Chain Integration: CAKE’s existence on Binance Smart Chain means it benefits from the chain’s efficiency and low transaction fees, making it an attractive token for traders and liquidity providers.
As we can see from above, CAKE is not just a cryptocurrency; it’s a central cog in the PancakeSwap machine, facilitating various activities on the platform and driving community involvement. As PancakeSwap continues to evolve in the DeFi space, the role and utility of CAKE are likely to expand, reflecting the innovative spirit of this dynamic ecosystem.
How to use Pancakeswap?
To interact with PancakeSwap, you need a compatible wallet. Think of this as your gateway to the world of DeFi. Here’s how you can set it up:
- Choose Your Wallet: Popular choices include MetaMask, Trust Wallet, and Binance Chain Wallet. These wallets are renowned for their security and ease of use.
- Install the Wallet: For browser-based wallets like MetaMask, install the extension on your preferred web browser. For mobile wallets like Trust Wallet, download the app from your mobile app store.
- Secure Your Wallet: Upon installation, you’ll be given a seed phrase. This is the master key to your wallet and funds. Store it securely and never share it with anyone.
- Fund Your Wallet: Transfer BNB or other BSC-compatible tokens to your wallet. These will be necessary for transaction fees (gas) and for any trading or staking you plan to do.
Connecting to PancakeSwap: Now that your wallet is ready, connecting to PancakeSwap is a breeze:
- Visit PancakeSwap: Go to PancakeSwap.finance. Ensure you’re visiting the official site to avoid any scams.
- Connect Your Wallet: On the top-right corner of PancakeSwap’s homepage, you’ll see a “Connect” button. Click it, and select your wallet from the list.
- Confirm the Connection: Your wallet will ask for your permission to connect to PancakeSwap. Review and approve the connection.
Congratulations, you are now connected to PancakeSwap! Now let’s have a look of what you can do on the platform.
Trading crypto with PancakeSwap
PancakeSwap’s interface is designed for simplicity and ease of use. It’s straightforward for both crypto novices and seasoned traders, who can easily swap any two BEP-20 tokens. This includes popular cryptocurrencies and a plethora of unique tokens native to the Binance Smart Chain (BSC). The swapping mechanism is powered by liquidity pools. These pools contain pairs of different tokens and users swap their tokens against this pool. This is a departure from traditional exchanges where trades are matched with another user’s opposite trade.
Let’s break down the process of token swap into simple steps:
- Connect Your Wallet to PancakeSwap: Visit the official PancakeSwap website and connect your wallet. This usually involves confirming the connection on your wallet app. Once connected, your wallet’s balance and available tokens for swapping will be displayed. Ensure your wallet is funded with BNB, which is used for transaction fees on BSC. The easiest way to do this is sending your BNB tokens from a centralized exchange (like Binance) to your wallet address.
- Choose the tokens you want to swap: In the swapping interface, select the token you want to swap from and the token you want to swap to. PancakeSwap supports a wide range of BEP-20 tokens.
- Specify the Amount: Enter the amount of the token you wish to swap. PancakeSwap will automatically display the estimated amount of the new token you will receive.
- Adjust Slippage Tolerance: Slippage tolerance in DEX trading is a user-set percentage indicating the acceptable price variation between trade initiation and execution, to mitigate risks of price fluctuations in volatile markets. Therefore it is vital to prevent significant price changes during your transaction. Adjust it according to market conditions and your preference.
- Review and Confirm Transaction: Before finalizing, review the transaction details, including the amount of tokens to be swapped, the estimated received amount, slippage tolerance, and transaction fees.
- Execute the Swap: If everything looks good, confirm the swap on PancakeSwap and then confirm the transaction in your wallet. The tokens will be swapped through the liquidity pools on PancakeSwap.
- Transaction Confirmation and Receipt: After the transaction is submitted, wait for it to be processed and confirmed on the BSC. Once confirmed, the new tokens will be in your wallet, and you can view the transaction details on a BSC explorer like BscScan.
- Post-Swap Considerations: Remember to monitor your wallet balance and manage your new tokens as you see fit. You can participate in staking, farming, or hold your new tokens.
Note: Unlike centralized exchanges, PancakeSwap doesn’t take custody of your funds. Transactions are wallet-to-wallet, maintaining the ethos of decentralization.
Providing liquidity on PancakeSwap, a process integral to its Automated Market Maker (AMM) system, is a straightforward yet significant activity. Here’s how you can engage in this essential DeFi function:
- Preparation: Ensure you have a Binance Smart Chain-compatible wallet, such as MetaMask or Trust Wallet, with sufficient BNB for transaction fees. Choose a token pair you want to provide as liquidity; typically, this involves the platform’s native token, CAKE, and another BEP-20 token like BNB.
- Accessing PancakeSwap: Navigate to PancakeSwap’s »Liquidity« page. This is where you’ll manage your liquidity contributions
- Select Tokens: In the liquidity interface, choose the token pair for which you wish to provide liquidity. If we take BNB and CAKE as an example, you would select BNB in one field and CAKE in the other.
- Inputt Amounts: Decide the amount of each token you want to provide. Enter the amount for one token, and PancakeSwap will automatically calculate the equivalent amount needed for the second token based on current market rates.
- Enable Tokens: Before you can supply liquidity, your wallet may require you to »Enable« the tokens for use on PancakeSwap. This is a standard security feature in DeFi protocols.
- Supplying Liquidity: After enabling the tokens, you can proceed to supply the liquidity. Confirm the action in your wallet when prompted. This step finalizes your contribution to the liquidity pool.
- Receiving LP Tokens: Upon successful transaction, you’ll receive Liquidity Provider (LP) tokens, representing your share in the pool. These tokens can be used in various ways, including staking in farms on PancakeSwap to earn additional rewards.
Note: that providing liquidity on PancakeSwap is not just a way to earn passive income but also a crucial contribution to the platform’s efficiency and liquidity.
Staking on PancakeSwap
In crypto world, staking involves locking up a certain amount of a digital asset to support a blockchain network’s operations, typically in proof-of-stake (PoS) systems. Users who stake their coins participate in transaction validation and network governance. As a reward for their contribution, stakers receive additional coins, often proportional to the amount staked. This process can be lucrative as it generates a passive income stream, akin to earning interest, while contributing to the network’s security and efficiency.
By staking your CAKE tokens in Syrup pools on PancakeSwap, you can effectively compound your earnings. Begin by navigating to the ‘Pools’ section under the ‘Earn’ menu. Here, you’ll find a list of available pools, each with its own annual percentage yield (APY) and the total staked amount. Choose a pool, then enable CAKE staking in your wallet by clicking »Enable«. After this, specify the amount of CAKE to stake and confirm the action. In some pools, your earnings might be automatically reinvested, enhancing your yield farming strategy on the BNB Chain.
- Put CAKE and BNB tokens (or any other token) to the CAKE/BNB liquidity pool, in return receiving LP tokens. These tokens enable you to earn a share of the transaction fees generated by traders utilizing that pool.
- Move these LP tokens to a specific »Farm« on the platform, where you start accumulating CAKE tokens as rewards.
- Lastly, by staking your CAKE tokens in a Syrup pool, you can earn extra interest on your holdings.
As we mentioned before, the first step in yield farming is adding liquidity. Users connect their wallet to PancakeSwap and deposit token pairs into liquidity pools at a predetermined ratio. This action generates liquidity provider (LP) tokens, symbolizing the user’s share in the liquidity pool. With LP tokens, users can engage in yield farming by depositing them into “farms” to earn CAKE tokens, the native cryptocurrency of PancakeSwap. The process involves:
- Select a farm on PancakeSwap that is compatible with the user’s LP tokens.
- Considerithe annual percentage rate (APR) offered to stakers.
- Enable and stake LP tokens in the chosen farm.
- Confirm the transaction through the user’s wallet.
- Harvest earnings and staked LP tokens when desired
You might ask yourself – what’s the difference between staking and yield farming
Yield farming and staking are two methods of earning rewards with cryptocurrency, but they differ in their approach and risk:
- Yield Farming: This involves providing liquidity by depositing a pair of tokens into a liquidity pool. In return, you receive liquidity provider (LP) tokens. You can then stake these LP tokens in a “farm” on PancakeSwap to earn CAKE tokens. Yield farming on PancakeSwap is a bit more complex and involves engaging with liquidity pools and earning rewards based on trading fees and token incentives.
- Staking: Staking on PancakeSwap is more straightforward. You directly stake CAKE tokens in Syrup pools. By doing this, you support the network and earn rewards, usually in the form of CAKE tokens. This process is simpler than yield farming as it involves staking a single token and earning rewards based on the staking pool’s performance and the allocated rewards.
The lottery operates on a randomized draw principle, where participants buy tickets using the CAKE token. Each ticket has a unique set of numbers, and if these numbers match the winning set drawn by the system, the ticket holder wins a prize. The draw system is powered by Chainlink’s implementation of Verifiable Random Function (VRF), ensuring fairness and security in the drawing process. Lottery tickets can be purchased directly on the PancakeSwap Lottery page. Each ticket is priced at 5 USD in CAKE, and participants have the option to either buy tickets with random numbers instantly or customize their ticket numbers according to their preferences.
After purchasing tickets, participants can view and manage their tickets on the PancakeSwap website. They can check their tickets against the winning numbers drawn to see if they have won. The winning criteria are based on the correct matching of the ticket digits in the right order. Different prize brackets exist, depending on how many numbers a participant matches, but these brackets do not stack – meaning if you match three digits in a row, you only win prizes from the “Match 3” bracket, not from the lower brackets. The prize pool for each lottery round is generated from ticket purchases, rollover prizes, and CAKE injections from the PancakeSwap treasury. Every CAKE token used to purchase tickets contributes entirely to the prize pool. Unclaimed CAKE in certain prize brackets rolls over to the next round, continually growing the prize pool. Additionally, an average of 35,000 CAKE tokens are injected into the lottery rounds each week from the treasury, enhancing the potential winnings.
In summary, the PancakeSwap Lottery is an exciting aspect of the platform, offering users a unique way to engage with the DeFi space, potentially winning rewards while contributing to the ecosystem’s vibrancy and appeal.
Trade NFT on PancakeSwap
PancakeSwap has recently introduced its NFT Marketplace, enabling the purchase and sale of non-fungible tokens (NFTs) on the BNB Smart Chain. This platform stands out for its user-friendly interface and clear, straightforward procedures, contributing to the growing array of NFT marketplaces available today. Here’s a detailed walkthrough on how to get started:
- Connect Your Wallet: If you’re using a wallet like MetaMask, which typically operates on a different network, ensure you switch it to the BSC network. This is crucial as all transactions on PancakeSwap, including NFT trades, occur on the BSC network.
- Fund Your Account: The primary currencies used are BNB (Binance Coin) and CAKE, PancakeSwap’s native token.
- Create Your Profile: PancakeSwap’s NFT marketplace features an interesting profile setup aspect. After connecting your wallet, you can create a profile on the platform. Each new account has the opportunity to mint a starter collectible as their first NFT, with the only cost being a small CAKE minting fee. This personalized profile is your gateway to engaging with the NFT marketplace on PancakeSwap.
- Join a Team: A unique aspect of PancakeSwap’s NFT marketplace is the team mechanic. Although the full mechanics of this feature are yet to be released, users can sign up for a team, participating in team events to earn CAKE, NFTs, and other rewards. This adds a community dimension to the NFT trading experience.
- Buy an NFT: To buy an NFT, navigate to the NFT section on PancakeSwap and browse through the verified collections. Once you’ve decided on a collection and a specific NFT, proceed to purchase it by clicking the buy button and signing the transaction. Ensure you have sufficient BNB for the transaction. After the purchase, you can view your new NFT in your wallet, similar to how you would on platforms like OpenSea. You can also manage, sell, or transfer your NFTs from this interface.
Pancakeswap recently launched the Gaming Marketplace – a hub where developers can directly build, publish, and update games on the platform. At its launch, the marketplace featured two games: “Pancake Protectors,” developed in collaboration with Mobox in May 2023, and a new entry, “Pancake Mayor,” a casual city-building game. Impressively, “Pancake Protectors” managed to attract over 25,000 players in a single day at its peak, showcasing the high engagement potential of these games. The PancakeSwap Gaming Marketplace is designed to facilitate interaction among gamers, developers, and the broader PancakeSwap community, encouraging them to play, build, and connect.
Now PancakeSwap operates across nine popular blockchains, including BNB Chain, Ethereum, Aptos, Polygon zkEVM, zkSync Era, Arbitrum One, Linea, Base, and opBNB. This wide range of blockchain compatibility opens doors for developers from these networks to contribute their gaming creations to the PancakeSwap ecosystem.
The team envisions this marketplace as a medium for game developers to tap into its substantial user base, claiming a potential reach of 1.5 million monthly players. The platform is tailored to ease the integration of CAKE and PancakeSwap’s own NFTs, offering developers various monetization and earnings options. This new venture into GameFi underscores PancakeSwap’s commitment to diversifying its offerings and enriching the user experience within its ecosystem.
PancakeSwap stands out in the decentralized finance (DeFi) world, primarily due to its strategic use of the Binance Smart Chain, which offers lower fees and faster transactions than Ethereum-based platforms, such as Uniswap. Its innovative features like Automated Market Maker, staking, yield farming, and the integration of NFTs cater to a wide range of users. The CAKE token, pivotal in its ecosystem, adds to its appeal by enabling governance and staking. With recent expansions and a robust community, PancakeSwap is evolving rapidly, positioning itself as a top altcoin trading platform in the DeFi sector. Its blend of user-centric design, innovation, and strategic market presence make it a strong contender in the cryptocurrency trading landscape.
What is PancakeSwap?
PancakeSwap is a decentralized finance (DeFi) platform on the Binance Smart Chain, known for token swapping, staking, yield farming, and offering low fees with high-speed transactions.
How does PancakeSwap differ from other decentralized exchanges?
Unlike Ethereum-based DEXs, PancakeSwap runs on the Binance Smart Chain, resulting in significantly lower trading fees. It focuses on BEP-20 tokens and uses an Automated Market Maker (AMM) model for trading.
What additional features does PancakeSwap offer?
Besides trading, PancakeSwap offers Syrup Pools for staking, game-like experiences, lottery systems, and a collection of bunny-themed NFTs. It also hosts Initial Farm Offerings (IFOs) for new coins.
What is CAKE token and what are its uses?
CAKE is the native token of PancakeSwap, used for trading, staking, yield farming, participating in governance, lotteries, and other platform games. It also plays a role in the platform’s reward system and token burning mechanism.
How to start using PancakeSwap?
To use PancakeSwap, choose and install a compatible wallet like MetaMask or Trust Wallet, secure it with a seed phrase, fund it with BNB or BSC-compatible tokens, and connect to PancakeSwap via its official website.
What to trade crypto on PancakeSwap?
Trading involves connecting your wallet to PancakeSwap, selecting tokens to swap, specifying amounts, adjusting slippage tolerance, reviewing transaction details, and executing the swap. Transactions are wallet-to-wallet, maintaining decentralization.