PancakeSwap is a DEX designed for exchanging Binance Chain Evolution Proposal 2 (BEP2) tokens.
For months, the food-themed yield farming craze has captivated large quantities of users across the crypto space. In the latest wave of Defi protocols, we have seen many sites that allow yield farmers to spend their funds in return for protocol tokens.
The bulk of this operation is hosted on the Ethereum network. As one of the first blockchains enabling smart contracts, Ethereum has an extensive ecosystem of users, engineers, and instruments for creating efficient decentralized apps.
In this guide, we will take a close look at PancakeSwap, a recently introduced Binance Smart Chain-based decentralized exchange (DEX).
Table of Contents
Background
PancakeSwap was launched recently in Sep 2020 by a team of exceptional developers and was quickly taken up by the centralized crypto exchange to run on its own Binance Smart Chain.
On the Ethereum chain, the whole PanckakeSwap protocol is executed while embracing smart blockchain contracts. The platform also has a tremendous support group that continually attempts to create decentralized apps.
The Pancake DeFi exchange enables BEP20 tokens to be exchanged. If you have experience with SushiSwap, you can intuitively understand the PancakeSwap concept, because both of them have the same creative design.
What is PancakeSwap?
PancakeSwap is a DEX designed for exchanging Binance Chain Evolution Proposal 2 (BEP2) tokens. In line with this, it operates on the Binance Smart Chain (BSC) as opposed to the currently-sluggish and costly Ethereum network.
PancakeSwap is a new DeFi protocol and a cryptocurrency network designed for direct trading. Many food-themed yield farming collaborators in the crypto industry have been added by it. By acting as a liquidity provider under the staking mechanism, Pancake helps group administrators and investors to receive tokens.
How to use PancakeSwap?
PancakeSwap utilizes a mechanism known as an Automated Market Maker (AMM) platform, which ensures that there is no order book where you are paired with someone else when you can share digital assets on the platform. You trade against a liquidity pool instead.
Those pools are packed with funds from other consumers. Furthermore, they obtain liquidity provider (or LP) tokens in the exchange by depositing them into the pool. To recover their share plus a fraction of the trade costs, they will need to use certain tokens.
The LP tokens are also referred to as FLIP tokens. For instance, if you deposit BNB and BUSD to the pool, you can earn BNB-USDT FLIP tokens in exchange.
PancakeSwap Fees
The trading fee is 0.2% on PancakeSwap. This comprises of the 0.17% that goes to the liquidity providers and 0.03% that goes to the PancakeSwap Treasury.
All that give liquidity to PancakeSwap receive LP tokens and win a portion of the trading costs relative to other decentralized exchanges (AMMs) such as Uniswap, Mooniswap, and SushiSwap.
PancakeSwap Supported Wallets
MetaMask, TrustWallet, TokenPocket, and WalletConnect are being supported by PancakeSwap. However, to make transactions on PancakeSwap using MetaMask, you need to set it up for the Binance Smart Chain.
WalletConnect enables users to connect to Dapps through their mobile wallets like TrustWallet.
You can use PancakeSwap and the dapp browser of Trust Wallet to stack CAKE and SYRUP tokens on mobile phones. If you have installed Trust Wallet on your mobile device, using PancakeSwap could be a much simpler task.
Staking Chain
To invest CAKE tokens, you first need to transfer CAKE and some BNB to a wallet that is sponsored by PancakeSwap. You can move BNB to your BEP20 (Binance Smart Chain) address in order to pay transaction charges.
To stake CAKE, click on the “staking” tab on PancakeSwap and then click on the “unlock” button to unlock your wallet if you have not yet attached your wallet to the dapp. You need to accept the dapp’s CAKE token, first of all. After that, you should put your tokens on CAKE.
Compared to Ethereum, transaction fees on the Binance Smart Chain are exceptionally cheaper. For every transaction, you won’t be paying much so you can enjoy DeFi on Binance Smart Chain freely without worrying about the fees.
Moreover, there is another token referred to as SYRUP in the PancakeSwap protocol. If you have funds deposited to get LP tokens and have used these tokens to get CAKE, it can be used to receive a SYRUP token, which will provide you with the ability to govern the platform.
Adding Liquidity to PancakeSwap Pools
To gain trading fees and CAKE tokens, you can add liquidity to PancakeSwap pools by piling your FLIP tokens (LP token). Simply head over to the exchange webpage and apply liquidity to PancakeSwap pools. But to see which pool is best for farming CAKE tokens, you can first check out the pairs on the “farm” tab. For the CAKE/BNB combination, the incentive multiplier sum is 20x and is maximum currently
You can get FLIP tokens and receive trading commissions (0.17 %) when you supply PancakeSwap pairs with liquidity. After providing liquidity to a pair under the farm tab, you can stake the FLIP tokens on the same page and benefit from CAKE tokens in addition to trading costs.
Cake Token Farming
Once you have the tokens for FLIP, head back to the Farm screen, and choose the option to fit your LP tokens. Like with ERC-20 tokens, the movement of BEP20 tokens would need to be approved. This is what enables the contract to transfer them on your behalf.
Once the agreement is verified, merely pick and validate the sum you wish to spend. You can navigate away from the page and come back at any time to verify how much CAKE you have won, click on Harvest and validate the transaction if you want to harvest it at any point.
You need to unlock your crypto wallet to access all the PancakeSwap’s functionality and other related features. You can connect with Binance’s smart chain focused on Ethereum web applications with this wallet.
The transfer of BEP20 tokens will require your permission. You just need to fix the number you want to hang on to the share and then validate the transaction. Then you can check the CAKE that you have won and delete the sum anytime you like using the harvest option.
Once you stake your LP tokens on the farm and lock them for the next step, you can then get CAKE as compensation. You can deposit these different LP tokens listed below:
- CAKE-BNB FLIP
- BUSD-BNB FLIP
- ADA-BNB FLIP
- BAND-BNB FLIP
- DOT-BNB FLIP
- EOS-BNB FLIP
- LINK-BNB FLIP
- BAKE-BNB Bakery LP
- BURGER-BNB FLIP
Is PancakeSwap Safe?
In the case of PancakeSwap, there have been no audits. Even for audited and extremely respectable projects, depositing funds into a smart contract still carries the possibility of glitches. It should be noted that one should never make more deposits than they can afford to lose.
Conclusion
In the building on the Binance Smart Chain, the creators of PancakeSwap cite high fees and sluggish speeds of the Ethereum blockchain as a driving force. Ethereum may have kick-started the DeFi movement, but programs such as PancakeSwap indicate that the surge is expected to extend to other chains. The smart contract has been exempted from auditing for PancakeSwap.
While the dangers exist, it is very clear that for its group members. And PancakeSwap strives to be open and satisfying to its yield farmers. With the liquidity mining processes in place, an ongoing investigation, and incorporation of further wallets, PancakeSwap seems to be primed for further adoption.
