How Does PancakeSwap Work?

PancakeSwap is a DEX on the Binance Smart Chain (BSC), comparable to SushiSwap yet with added features for earning rewards.

In contrast to the Ethereum-based SushiSwap and Uniswap (fellow DEXs and AMMs), congestion and high gas fees are nonexistent for this platform, which is based on a fourth-generation blockchain.

With trading in a matter of seconds, PancakeSwap has been going from strength to strength since the September 2020 launch, being especially popular amongst new crypto market entrants.

Challenging DeFi “centralisation”

BEP-20 is the staking mechanism for Binance coin BNB, the Binance version of ERC-20, yet it can be traded for far less. PancakeSwap has thus become a viable alternative to current DeFi leader and DEX pioneer Uniswap. Considering that the DeFi revolution was “born” on the Ethereum blockchain, with growing competition amongst Ethereum-based DEXs, this feat is commendable.

New tokens and projects

Users have the major benefit of access to new tokens. The developers had the savvy to allow transfer of USDT, BTC, BUSD, and ETH from the ETH chain to the BSC. Through using the deposit features, access is gained to all the top projects in the market, plus an impressive selection of BEP-20 exclusive tokens and other rare projects.

Streamlined interconnectivity with the Ethereum ecosystem

Understanding that a majority of the PancakeSwap user base would have an Ethereum background, great care was taken to streamline the process of interconnectivity. Developers ensured integration of popular wallets such as Trust Wallet, TokenPocket, WalletConnect, MathWallet and MetaMask. Built to support BEP-20 tokens alongside ERC-20 tokens, MetaMask can be linked to the Binance Smart Chain. A quick tutorial by Binance Academy explains how.

Offering a user-friendly interface

The interface resembles that of other popular DEXs, so no prior experience is needed. It is clearly designed with maximised profits in mind, for the experienced or newbie. It’s the familiar pattern of loaning digital assets to liquidity pools, receiving liquidity tokens in return and staking these again to continue earning profits.

Privacy and security

A private trading experience is provided through no required KYC/AML registration. Trading can commence as soon as a supported wallet is linked. Further steps, such as third-party audits, have been taken too.

Deflationary protocols

Various deflationary protocols are employed to help maintain token value, including burns—100% of CAKE raised in Initial Farming Offerings (IFOs) gets burned and 10% of all the profits from the PancakeSwap lottery, plus a percentage of farmed CAKE.

SYRUP Pools & LP Tokens

Exclusive liquidity pools—SYRUP pools—are where extremely high rewards can be earned, while providing additional opportunities to earn tokens other than CAKE, including UST, LINA and SWINGBY.

PancakeSwap Treasury and Lottery

An approximate 0.03% of all trading fees go to the Treasury for funding of further development. A PancakeSwap Lottery is held four times a day, where having 10 or more CAKE qualifies users for to take part. Payouts of rewards, varying from NFTs to CAKE, occur directly.

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