What is PancakeSwap? Binance Smart Chain Uniswap Analog Review

What is PancakeSwap?

It is a non-custodial Binance Smart Chain (BSC) platform for exchange, profitable farming using BEP-20 tokens. The site has its own CAKE token and is analogous to Uniswap and SushiSwap. But unlike these Ethereum exchanges, PancakeSwap has faster transactions and lower fees, as BSC is a much more centralized counterpart to Ethereum.

To service trading operations, the platform uses the automated market maker (AMM) model. This means that there is no regular order book on PancakeSwap. Instead, exchange trading is carried out within the liquidity pool, which is filled by the users themselves. In return, they receive liquidity provider (LP) tokens, which are needed to generate income from trading commissions, farming, and other things.

Who created PancakeSwap and when?

The platform was launched on September 20, 2020 by unknown developers with the support of Binance. In February 2021, PancakeSwap became one of the largest exchanges in the DeFi segment in terms of trading volume, and in March surpassed Uniswap in total blocked funds (TVL) – $ 4 billion versus $ 3.73 billion.

At the time of writing, PancakeSwap is in the top 3 decentralized exchanges:

Top 5 decentralized crypto exchanges. CoinMarketCap data.
According to TVL, PancakeSwap is the first in the BSC ecosystem and the fifth among all DeFi platforms.

Largest DeFi TVL on Ethereum (left) and BSC (right) according to DeFi Pulse and Defistation.

How do I start using PancakeSwap?

To start working on the exchange, you need to connect a Web3 wallet. To do this, the user must go to the official site of the site and click on the Connect icon. A window will open where you need to select a wallet. The options available are MetaMask, TrustWallet, MathWallet, TokenPocket, WalletConnect, Binance Chain Wallet, SafePal Wallet, and Coin98 Wallet.

Wallet connection screen.
After selecting a wallet, for example, MetaMask, another window will open where you need to confirm authorization.

What features does PancakeSwap provide?

Exchange. BNB is required to buy and trade tokens on the exchange. They can be bought directly from PancakeSwap or Binance and then transferred to a wallet. Trading takes place in the Trade section of the Exchange tab.

More than 1000 trading pairs are available in the second version of PancakeSwap. When exchanging tokens, traders pay 0.25% from each transaction, of which 0.03% goes to increase the fund, 0.05% is burned, and 0.17% is distributed among liquidity providers.

Exchange trading interface screen.

Liquidity. In the same section (Trade), you can become a liquidity provider by receiving LP tokens. To do this, you need to press Trade, and then Liquidity and Add Liquidity. After that, a window will appear where you should select two assets to replenish the corresponding liquidity pool. But before doing this, it is better to study what Impermanent Loss is in order to understand the potential risks.

Liquidity section interface screen.

Farms. LP tokens can be invested in one of the farms to receive interest income. To do this, go to the Farms section and select the farm that matches your LP tokens in the Liquidity section. For example, in the case of the CAKE-BNB LP pool, select the CAKE-BNB farm. After that, farming will begin with a reward in the CAKE token. You can get it at any time by clicking the Harvest button.

A window with a list of farms showing their profitability and liquidity.

Pools. In this section, you can invest CAKE tokens in syrup pools and thus earn on staking. The reward for staking will be the currency of the selected pool, that is, if you invest in the Earn SPS pool, you will receive SPS. The reward can be collected at any time by paying a transaction fee.

Listing of liquidity pools with their profitability and the amount of blocked funds.

Prediction. This is a new option that is in beta. It allows you to make money by predicting the BNB / USDT rate. In fact, this is an analogue of binary options with a 5 minute round. They are very risky because it is extremely difficult to predict price movement in such a short period. Before placing a bet, please read the rules and instructions carefully.

BNB / USDT rate prediction betting window.

Lottery. There is also a lottery on the platform that runs every six hours. To take part in it, you should go to the Lottery section and buy a ticket for $ 5. After that, you will receive a combination of six random numbers, each of which is in the range from 1 to 14, for example, “5-7-7-10-5-13”. To win, users must guess:

All six numbers to win or split 40% of the pot;
First five numbers to win or split 20% of the pot;
First four numbers to win or split 10% of the pot;
First three numbers to win or split 6% of the pot;
First two numbers to win or split 3% of the pot;
First number to win or split 1% of the pot;
The remaining 20% ​​will be burned out forever.
The PancakeSwap Lottery Terms and Conditions can be found in their FAQ.

Lottery conditions.

Collectibles. This section contains all the non-fungible tokens (NFT) issued on PancakeSwap. They can be won in one of the raffles, and then either exchanged for CAKE, or left in your collection. To take part in the NFT drawing, you need to register in the appropriate section.

NFT tokens on PancakeSwap.

Team Battle. Users can team up and take part in team competitions to win CAKE, NFT and other prizes. To do this, go to the Teams & Profile section, and then to the Your Profile tab and create your profile. On this page, you need to specify a nickname, select an avatar and a team. To create a profile, you need 1.5 CAKE.

An example of a created profile.
The essence of the competition is trading in certain currency pairs and getting various achievements on the crypto exchange. Which team will conduct more trades in terms of trading volume and get more achievements, that will be the winner. The current ranking of the teams is displayed in the Leaderboards tab. It is calculated based on the total trading volume and achievements of the top 500 members of each team. The rewards for the participants are determined by the share of their trades in the team’s trading volume.

Distribution of Team Battle prizes.

IFO (Initial Farm Offerings). IFO is the initial sale of tokens for a new blockchain project followed by listing on PancakeSwap. In fact, this is the same IEO (Initial Exchange Offering), only on a decentralized platform. They are also called IDO (Initial DEX Offering). To buy new tokens, you need a profile on PancakeSwap and CAKE-BNB LP. For more information on IFO, visit the PancakeSwap website.

Launched IFOs on PancakeSwap.

How secure is PancakeSwap?

The exchange has been audited by CertiK and is integrated with all of its security tools: Security Oracle, CertiKShield DeepSEA, and The CertiK Virtual Machine. CertiK audit results can be viewed on this page. The site also passed the Slowmist security audit.

These checks make it possible to understand that the service is not a scam and does not have obvious vulnerabilities, but they do not guarantee the security of the platform, which proves the hacking of the DeFi protocol and the PancakeSwap lottery, which occurred after the CertiK audit. Therefore, be careful using any DeFi application, including PancakeSwap.

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