As measured by total value locked (TLV), PancakeSwap is the most popular decentralized exchange (DEX) on the Binance Smart Chain (BSC) blockchain. Compared to an exchange like Uniswap, which runs on Ethereum, PancakeSwap is significantly cheaper and trades settle faster.
Exodus wallet is proud to announce that we now support CAKE and other popular BSC assets, and in this article, we’ll explain what is PancakeSwap, how to use it, and why some cryptocurrency traders are choosing it over Uniswap.
What is PancakeSwap?
Similar to Uniswap, PancakeSwap is an Automated Market Maker (AMM) protocol. An AMM draws liquidity from a pool of assets deposited by Liquidity Providers (LPs). LPs, who can be normal crypto users like you and me, are incentivized to deposit tokens because they earn a portion of the PancakeSwap trading fees and CAKE tokens.
When a user makes a trade on PancakeSwap there is no order book (with a long list of trades waiting to be filled), rather the trade is executed against the assets deposited in the liquidity pool. The more assets in the pool, the better the trade execution. For example, in a low-liquidity pool a $10,000 trade might have a lot of slippage, and then the trade doesn’t clear at a good price.
On the other hand, in a pool with tons of liquidity, a $100,000 trade could clear with very little slippage.
All AMM protocols, including PancakeSwap, SushiSwap and UniSwap, operate using the same model. If you’re unfamiliar with AMM technology a full explanation is available here.
The Different Tokens
PancakeSwap uses two tokens on their exchange.
What is the CAKE Token?
The CAKE token is the backbone of the PancakeSwap exchange. When LPs deposit their assets into the PancakeSwap exchange they earn CAKE tokens. The tokens have several use cases.
- CAKE hodlers can farm out their tokens to earn even more CAKE
- CAKE can be deposited into a Syrup pool to earn other tokens
- Investors can use CAKE to create a Pancake profile
- CAKE is used to mint a NFT
- CAKE is a governance token that investors can use to vote on proposals related to the PancakeSwap exchange
- PancakeSwap lottery tickets can be purchased with CAKE
There are currently 223,313,920 CAKE in circulation and approximately 386,000 CAKE are created and distributed each day. The actual minting is much higher, however, hundreds of thousands of CAKE are burnt every day via multiple deflationary mechanisms. i.e. all of the CAKE spent on profile creation and minting NFTs are burned.
Current governance proposals can be viewed on the PancakeSwap website.
What is the FLIP Token?
FLIP tokens, also known as LP tokens, are the liquidity provider tokens for the PancakeSwap exchange. To get LP tokens you have to provide liquidity for a certain trading pair, for example you can stake CAKE-BNB to get the CAKE-BNB LP token.
Once you have LP tokens you can farm them out to earn even more CAKE! A full guide to yield farming with LP tokens is available here.
How to Use Pancake Swap
Connecting a wallet is the first step in using PancakeSwap. For Ethereum users the easiest option is to use MetaMask, which can be configured to work with BSC. A helpful guide to using MetaMask with BSC is available here. It’s also possible to create a new BSC wallet by following these steps.
Once you have a wallet the next step is to get some BEP20 tokens. Buying tokens on Binance is the easiest method, however, you can also use the cryptocurrency wallet SafePaypal to get your coins. PancakeSwap has an entire guide that explains how to get BEP20 tokens for the first time.
If you simply wish to buy CAKE and hold it safely, you can do some from within the Exodus wallet, so long as you have some other cryptocurrency in there to swap from.
A fully illustrated guide to exchanging assets is available on PancakeSwap’s website.
For everyone who is sick of paying high gas fees with Uniswap, using PancakeSwap (or Sushiswap over the BSC network) could be a great solution. Since it runs on BSC, PancakeSwap is significantly cheaper than using a decentralized exchange on Ethereum.
There are also generous yield farming opportunities with PancakeSwap, for anyone who cares more about farming than swapping assets.
As with any other decentralized exchange there is no registration and anyone can join, but users should tread carefully and do plenty of research before locking away their tokens, as hacks and exploits are still common in the world of DeFi.
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This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.