DeFi rocked 2020. Although not on the limelight at this point in 2021 compared to the ongoing BTC and ETH rally, it is still the most impressive trend in crypto. This new year will definitely see new defi projects come and go. I have been really amazed by the possibilities presented by defi to a random crypto user like me. Any user can be central to these financial projects and that’s the beauty attached to this concept.
Having said that, I never actually capitalized the full potential of defi projects on Etheruem. As I mentioned in one of my articles , the high ETH gas fee makes it almost impossible for users like me who are not dealing in investment amounts that are less than 5K. Now, the fee is higher as the ETH price has exploded in 2021 :)
Not a limitation but my inability to deal with such a high investment has forced me to explore defi projects elsewhere. And, that’s when I found defi projects launched on Binance Smart Chain. There are many other defi projects on various blockchains e.g. Solana. However, I chose Binance Smart Chain because I was familiar with Binance - I am their regular user, and also feel comfortable to deal in their native token - BNB.
Binance Smart Chain
There are many great articles written by leofinance users on Leofinance.io. Here are some of the articles I read before.
Binance Smart Chain is a blockchain with smart contract functionality and compatibility with Ethereum Virtual Machine (EVM). The idea behind ETH virtual machine compatibility is to provide flexibility to developers to provide the connectivity to ETH based projects and products. For example, I was able to use the Metamask wallet to connect with Binanace Smart Chain because developers were able to configure Metamask connectivity with Binance chain network. ETH is the platform king where all defi project developments are happening and Binance wants a share of that ongoing development. It is also because Binance wants to bring all the qualities that are with ETH defi projects on its smart chain network. I think that’s a smart move by Binance as developers will likely benefit from that flexibility in serving users using both blockchain networks.
There are many projects being developed on Binance Smart Chain. The project I selected was Pancakeswap.finance. You can already figure out that it’s pretty similar to Uniswap. Pancakeswap is almost a clone to Uniswap in its functionality and structure. Like UNI, it has its own native token called “CAKE”.
There are many things you can do on Pancakeswap.
Swap and farm
It’s a decentralized (semi?) exchange platform where you can swap various assets. It utilizes an automated market makers model where liquidity providers can provide their liquidity in various asset pairs to facilitate asset trading. Liquidity Providers receive LP fees for each transaction.
There’s more - Farm ‘CAKE’
Like any other defi project, it also provides you with options to yield-farm using various asset pairs. You can earn/farm a secondary token “cake” on the platform. I deposited my LP tokens and locked them to earn “cake”.There are many asset pairs you can deposito but the one I am using is -BNB and CAKE pair. Since this is a relatively new defi project the yield return is very competitive which can go up to 300% APY depending on the pair. The BNB-CAKE pair APY right now is at around 170%. It is not bad at all.
Since the project is backed by Binance, there are many new assets promoted by Binance available on the platform to farm.
Wait, you can also stake your “CAKE”
There’s one more thing you can do with the ‘cake’ you farmed on the platform. I typically harvest all ‘cake’ I earned in a week and stake them to earn more ‘cake’. The stake functionality is where you can stake ‘cake’ and earn various other tokens including ‘cake’. The APYs are insane.
What do I think?
I think Pancakswap is perfect for someone like me who is not investing a lot but wants to experience defi and wants to know how it works. The fees are very cheap compared to ETH and the transaction time is fast. There has not been a major glitch with transactions for the last two months.
There are many posts out there suggesting Binance Smart Chain is doing a fair enough job in copying Ethereum in giving you the defi experience users want. The liquidity is 187 M and the volume is decent enough. It is looking good so far.
However, we all need to understand the risk associated with these defi projects. The smart contract functionality could have bugs and there are always shortcomings in codes that could be compromised. As we all say all the time, invest the amount of money you can afford to lose. If you understand that and are okay to experiment, pancakeswap could give you a taste of what DeFi is and how it works.
First Posted Using LeoFinance Beta