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PancakeSwap

What Is PancakeSwap | Detailed Review

By Guarda Wallet | Guarda Wallet Blog | 29 Jan 2024


What Is PancakeSwap?

The PancakeSwap project, created in September 2020 through a fork of the Uniswap code, was developed based on Binance Smart Chain, an alternative to the Ethereum network. PancakeSwap is a decentralized exchange platform responsible for creating an automated marketplace (AMM) in digital assets, allowing the exchange of existing tokens in the Binance Smart Chain (BSC).

The exchange is built on a series of automated smart contracts distributed on BSC, Binance’s blockchain. In addition, this platform has its token called CAKE, which is of the BEP-20 type (the same design as the EIP-2 tokens). It also allows importing tokens from other platforms via the Binance Bridge. It converts them into the BEP-20 token for use within the decentralized exchange. To add to this, PancakeSwap is a solution developed for the DeFi marketplace that allows traders to exchange tokens without intermediaries and high fees.

How Does PancakeSwap Work?

The essence of this platform is the participation of users, who are responsible for adding liquidity by exchanging tokens. Users can also stake on token values, add coins, and play the lottery. Users also have the ability to use IFO (“Initial Farmer Offerings”) to add more tokens.

As a result, Pancakeswap is gaining popularity and can increase its value. As a consequence, user trust increases, which attracts more investors. So a virtuous circle is formed that makes this DEX more powerful.

Liquidity Pool

PancakeSwap requires participants to contribute their tokens to provide liquidity. The liquidity provider (LP) tokens on this DEX are called ‘FLIP’ tokens. These tokens may vary depending on the pair of tokens to which the liquidity is added.

Once funds are added to the liquidity pool, CAKE token rewards will be received. Syrup (as liquidity pools are called) holds many tokens that can be used to add liquidity. In return, you can receive a certain amount of CAKE tokens based on the annual percentage yield (APY), which is the amount you can earn if you keep accumulating tokens for an entire year.

Farming

Farming is a solution that allows users to add tokens in exchange for rewards. Rewards can be aggregated and used in different protocols. As a result, users can increase the profitability of their tokens through high commissions.

Liquidity providers are interested in adding their tokens to the liquidity pool based on smart contracts. The incentive can consist of a percentage of transaction fees and interest on token credits and is usually issued per CAKE management token.

Commissions

PancakeSwap fees are much lower than those of a decentralized exchange. Most of the cost reduction is because it is a decentralized platform with no token storage. It also reduces the need to maintain the platform and servers to keep it running. This set of points allows for a significant reduction in transaction fees.

PancakeSwap currently charges 0.25% for every transaction made on DEX. 0.17% of the total amount is earmarked for use as a liquidity pool fee. 0.03% of the fees go to the DEX treasury, and, in addition, 0.05% is used to redeem and burn CAKE tokens.

Lottery

PancakeSwap has developed a lottery system that gives you a chance to win big prizes. Big prizes are drawn every 6 hours. For example, when you purchase a 10 CAKE lottery ticket, the user receives a set of four numbers between the numbers 1 and 14. For instance, 4-11-5-14.

The prize will be awarded only if the four drawn numbers match the numbers on the list and are in the same order. The amount of the prize is 50% of the amount spent to purchase the tickets.

Predictions

Pancake exchange contains many unusual elements to encourage user participation. One of the most curious elements of PancakeSwap at the beta testing stage is BNB token price predictions. The mechanism allows us to bet on a rise or fall in the price of a Binance Coin token. The process takes 5 minutes, after which it is possible to bet on the rise or fall of the price before the start of a new period. In case of winning, the player receives the number of tokens placed plus a percentage.

NFT

That’s not the end of the features of this decentralized exchange platform. In addition, PancakeSwap features a collection of adorable NFTs that can be earned and exchanged for CAKE tokens or saved as collectibles.

IFO

IFO (Initial Farming Offerings) is a source that provides the ability to earn a certain amount of recently launched token available to users who use farming to increase profitability. PancakeSwap allows you to add token liquidity to a supported pool to gain access to a recently launched token sale.

Is PancakeSwap Safe?

The exchange has been audited by CertiK and integrated with its security tools: Security Oracle, CertiKShield DeepSEA, and The CertiK Virtual Machine. Based on the results of these audits, it is clear that the service is not fraudulent, has no apparent vulnerabilities and can guarantee platform security.

Conclusion

Over the past couple of years, second and third-generation decentralized exchanges have achieved significant traction thanks to decentralized finance (DeFi). DeFi and DEX continually feed off each other to develop cryptocurrency capabilities and functionality. For example, Pancakeswap relies on blockchain, less widespread than Ethereum, to gain certain competitive advantages over other DEX.

Like other DEXs of this type, PancakeSwap aims to offer additional elements that enhance the usability and community. In addition, the incentives to add liquidity to the network are very high, so this platform is widely used to generate income without the need to run mining and trading projects.

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Guarda is a custody-free multi-platform cryptocurrency wallet with a user-friendly interface designed to store, buy, stake, and exchange crypto assets. https://guarda.com


Guarda Wallet Blog
Guarda Wallet Blog

Guarda is a custody-free multi-platform cryptocurrency wallet with a user-friendly interface designed to store, buy, stake, and exchange crypto assets. https://guarda.com

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