Decentralized exchanges (DEXs), as opposed to popular, centralized cryptocurrency exchanges such as Binance and Coinbase, which are controlled by a single, corporate company, allow for trading without the use of an intermediary.
Many of these decentralized exchanges (DEXs) are built on Ethereum, which is where the majority of the decentralized finance (DeFi) activity takes place.
However, as competing smart contract blockchains gain traction, similar decentralized exchanges (DEXs) are cropping up in other parts of the world, some with their own distinctive twists. Because PancakeSwap is built on Binance Smart Chain rather than Ethereum, it has significantly lower trading costs than Ethereum-based exchanges like Coinbase and Kraken.
Although the Binance Smart Chain is newer and less established than Ethereum, PancakeSwap is already making significant ripples among decentralized exchanges.
Here's all you need to know about PancakeSwap on the Binance Smart Chain, as well as a basic introduction on how to get started with the platform.
What is PancakeSwap and How does it Work?
If you're looking to transfer tokens and cryptocurrencies without the need for an intermediary, PancakeSwap is the decentralized exchange you're looking for, while maintaining custody of your tokens throughout the process.
It is based on automated smart contracts that have been deployed on Binance Smart Chain, the blockchain platform that is operated by the cryptocurrency exchange Binance, according to the company.
Despite its role as a controlled exchange, PancakeSwap, which was established by anonymous coders, is not under the jurisdiction of Binance. The service has a look and feel that is quite similar to the prominent Ethereum decentralized exchange, Uniswap. With the exception of tokens from other platforms that are "wrapped" as BEP-20 tokens for use on the DEX via Binance Bridge, PancakeSwap is only utilized for BEP-20 tokens that operate on the Binance Smart Chain.
PancakeSwap, like many other DEXs, is based on an automated market maker (AMM) system, which depends on user-generated liquidity pools to facilitate cryptocurrency trades and transactions. Instead of dealing with an order book and trying to locate someone else who is interested in exchanging the tokens you have for the tokens you want, users can use smart contracts to lock their tokens into a liquidity pool. This enables you to make the swap you desire, and individuals who choose to leave their coins in the pool continue to collect incentives throughout the process.
PancakeSwap is one of a growing number of decentralized financial infrastructure (DeFi) systems that let cryptocurrency traders to make transactions with trade tokens without the need for a middleman to take a significant portion of the funds. There are DEXs on Ethereum (such as Uniswap) with substantially larger average trading volume, but it is one of the largest on the Binance Smart Chain.
However, while PancakeSwap has managed to dethrone Uniswap on several occasions to become the most popular DEX in terms of trade volume, it is unable to continuously hold onto the top spot in that category.
As previously stated, token swaps take place between token pairs through the use of liquidity pools. Other users who stake their tokens in the liquidity pools gain a percentage of the profits earned by transactions. Users are able to trade one type of token for another without the need for a middleman.
The PancakeSwap experience, as a whole, is much more than just eating pancakes. The DEX also allows you to stake coins into so-called Syrup Pools, which are pools of currency that reward you with increasing amounts of money.
Think about how you can stake CAKE, PancakeSwap's native token, and make even more CAKE just by leaving it to sit in the Syrup Pool for a prolonged period of time.
There's even an auto-stake feature that will re-stake your CAKE at least once every hour, allowing your rewards to grow exponentially. As a liquidity provider, you will receive your portion of the token pool as well as any additional tokens in return gained from trading fees.
Among the game-like experiences available on PancakeSwap include wagering on whether the price of Binance Coin (BNB) will climb or fall within a specified period of time. Users can also purchase lottery tickets in the hopes of winning a large sum of CAKE tokens, and the DEX has a large selection of collectible non-fungible tokens (NFTs) with bunnies as the motif that can be purchased. There are also Initial Farm Offering (IFO) sales, which let you to purchase fresh new coins from projects that are just getting started.
PancakeSwap is the latest in a long line of food-themed cryptocurrency ventures, which includes SushiSwap, Yam Finance, BakerySwap, and Kimchi Finance, among many others.
What is it about it that makes it so Unique?
PancakeSwap eliminates the need for middlemen in centralized exchanges, allowing other users to gain the benefits of their efforts. If you're willing to put your tokens in a safe place for a period of time, the returns can be extremely lucrative, particularly when using some of the **liquidity pools** and staking alternatives.
To be sure, as with other DEXs, crypto newcomers will certainly have difficulty navigating PancakeSwap and comprehending its plethora of features. However, it may be worthwhile for you to put in the effort to find it out.
A step-by-step tutorial to getting started with PancakeSwap
PancakeSwap will not work unless you have your own cryptocurrency wallet, as the DEX does not accept fiat currency. PancakeSwap is compatible with a variety of wallets, including Trust Wallet, MathWallet, Binance Chain Wallet, and even MetaMask, among others.
Though it is an Ethereum wallet, MetaMask has the capability of being set to function with the Binance Smart Chain. Unlike centralized exchanges, you will not be need to enter a plethora of personal information—you will not even be required to create a profile.
Decrypt chose to make use of Trust Wallet, which is available on smartphones. Purchasing Binance Coin (BNB) from Binance.US and transferring it to your wallet is the first step in the process. Then, in order to utilize it at PancakeSwap, you'll need to convert it to Binance Smart Chain first. Trust Wallet makes it simple to do so by choosing the "More" button, selecting "Swap to Smart Chain," and paying a minimal transaction fee to have your money converted into Smart Chain.
All of PancakeSwap's features are displayed on the left-hand side of the screen while viewing the website in your web browser. When you wish to swap tokens, go to Trade and pick Exchange. Then select the token in your associated wallet you want to trade for which supported token on the DEX by going to Trade and selecting Exchange. To complete the transaction, you will need to confirm it within your wallet before it can be completed.
Farmers, or liquidity pools, are purchased with an identical number of tokens in a pair (such as CAKE-BNB) and earn you rewards in the process. These LP tokens serve to provide liquidity to the DEX and are purchased with an equal value of tokens in a pair (such as CAKE-BNB). This liquidity can be removed at any point, and the funds will be distributed in the form of the individual tokens that were originally swapped for the LP tokens, if any are left.
The foreseeable future:
Devs are flocking to Binance's Smart Chain to take advantage of lower trading fees and faster transaction speeds compared to the Ethereum network. In April 2021, Binance said that the platform has processed around 4.9 million transactions in a single day, which is more than three times the transactions that Ethereum has ever processed in a single day.