Guide to PancakeSwap

What is PancakeSwap? How does it work? What are its advantages? Find the answers in this guide.

Launched in September 2020 on the Binance Smart Chain (BSC), PancakeSwap is a decentralized exchange platform (DEX). The liquidity of the pools benefits from decentralized management through algorithms. This allows the use of an automated market maker (AMM) resulting in price stability. AMM also offers the possibility of taking part in exchanges with crypto-currency transactions in exchange for liquidity pools. 

This platform is based on the concept of DeFi (Decentralised Finance). The digital asset used is the CAKE token, which is currently very popular, as it simplifies transactions. Transactions are carried out almost instantaneously in less than 5 seconds. In addition, the platform's transaction fees are low compared to others. 

Designed to integrate with BSC, Pancakeswap's BEP-20 tokens can be combined with WMAs based on Ethereum's ERC20 token.

What are the characteristics of PancakeSwap?

Operating as a WMA, the Pancakeswap network allows peer-to-peer transactions with BEP-20 tokens on the BSC. Swaps between buyers and sellers are based on the use of algorithms and liquidity pools. 

Developers have designed simple protocols to facilitate the use of tokens to earn rewards. 

To make gains, the platform allows : 

  • Farming or yield farming : depositing a pair of cryptocurrencies into pools to earn CAKE.
  • Staking to lock in your funds to participate in the blockchain.
  • The lottery : by buying a ticket worth 10 CAKE, you participate in a draw to receive rewards. There is a lottery every 6 hours on the platform.
  • IFO (Initial Farming Offering) : to win CAKE for new BSC projects.
  • The Pancake Team : allowing to spend 2 CAKE to belong to one of the teams SYRUP STORM, Fearsome Flippers, or Chaotic Cakers, and participate in a Team Battle to win rewards.

PancakeSwap liquidity pools and rewards

Liquidity pools

There are currently 60 liquidity pools on the Pancakeswap platform. These are validation exchanges that each user has the right to create to multiply their coins. When the liquidity pool increases, the price of the CAKE does too. This operation does not require any negotiation, because the valuation of the funds is automated. 

Among the liquidity pools, SIROP pools are currently providing the best returns. Incidentally, these also provide rewards on digital assets such as LINA and UST.

By participating in a liquidity pool, the user supports the operation of the exchange platform. This participation is rewarded with a percentage of the value of the transactions concerned. Depending on the pool chosen, the rewards can take the form of other tokens.

Earning rewards through staking

To earn rewards, it is also possible to use a staking technique. This consists of putting tokens in the form of stakes for a set period of time. Depending on the amount allocated, one participates in the transactions among the delegates. These delegates are elected by the users. The value of the votes depends, among other things, on the tokens that the voters put into play. 

PancakeSwap offers IFO (Initial Farming Offering) yield pools on which you can use smart contracts. This allows you to trade and receive rewards. This is a new token distribution system that is based on BSC projects. Note that these projects are based on smart contracts.

How the PancakeSwap blockchain works

The limitations shown by Ethereum slow down ERC-20 based transactions. The number of ETH users has seen a large growth, which causes congestion issues. This has also caused the cost of transactions to rise, especially commission fees. To alleviate this problem, PancakeSwap was launched. 

The PancakeSwap brings a fluidity to transactions. As a reminder, transactions are completed within 5 seconds. The shortening of the execution time leads to an increase in the processing frequency. As a result, transaction costs are also reduced.

PancakeSwap also allows connection with other blockchains, for the pooling of certain functionalities. Thus, a trader can use the majority of their wallets on the CAKE network, including connecting with e-wallets, such as Trust Wallet, MathWallet and WalletConnect. 

This system allows everyone to trade CAKE and provide assets to the pools in order to collect additional coins. Note that the more CAKE you bet, the more reward coins you earn. These reward coins can then be used to make purchases and send money. 

It should be noted that these digital currencies are becoming more common, as many online shops accept them as a means of payment. Tokens can also be used to transfer money quickly and securely around the world. Moreover, the commission fees are almost zero on PancakeSwap. All you need is an electronic wallet.

CAKE features on PancakeSwap

With CAKE, users can participate in the governance of the gaming protocol. Indeed, the possession of tokens gives users the right to vote on proposals within the community. 

Tokens are also used to vote on proposed improvements to the CAKE distribution policy, including a reduction in awards. Thus, if 40 CAKE per block were originally issued, the reward is now 25 CAKE. This change is mainly aimed at reducing inflation. Indeed, the number of tokens issued by the Pancakeswap was not limited by the developers. 

Currently, tokens are distributed as follows :

  • 60% for Farming gains
  • 40% for deposits at the level of the liquidity pools

The advantages of using PancakeSwap

Since its launch, Pancakeswap has won over many traders. The DEX platform offers many advantages.

High Token Rewards

The Pancakeswap blockchain is popular because its security is ensured by the use of a governance currency, CAKE, which can be put into play in pools to obtain further reward tokens. 

There is also no limit to the amount of money that can be wagered, which allows for maximum winnings. Moreover, thanks to the use of CAKE, the user has the opportunity to win projects launched with Binance smart contracts. 

Low fees and fast transactions with PancakeSwap

Most other platforms make life hard for users. Ethereum is one example: commission fees are particularly high and can even exceed €20. In addition, due to the congestion of the network, transactions can be slow. PancakeSwap is more user-friendly.

On a platform built in BSC, transaction fees between BEP-20 tokens are worth on average between $0.04 and €0.20. 

The lack of KYC requirements on PancakeSwap

Pancakeswap is a DEX, but offers high security. Users benefit from total anonymity for their personal data, while avoiding the risks of hacking. Unlike centralized trading platforms, Pancakeswap does not apply KYC (Know Your Customer) requirements. AML guidelines against money laundering, which restrict the freedom of users, are not applicable. 

Transactions do not require authorization from any entity. Investors can therefore remain anonymous while taking advantage of the wide range of currencies offered by the platform. Currently, the network enjoys a global capitalization of nearly €3.5 billion. The trading volume in 24 hours is approximately €150,000.

PancakeSwap is a reliable and secure network

The Pancakeswap platform was audited by Certik to guarantee a high level of security. Indeed, this company has a good reputation when it comes to cybercrime. Since the launch, no problems have been reported by users.

How can you buy Pancakeswap tokens ?

Currently, the price of BEP-20 is €17.12. After an interesting start, Pancakeswap went through a low period, but is now rebounding. The forecast is good for 2022 and 2023. However, following the financial news and the evolution of the cryptocurrency market is always a good idea when it comes to investing in virtual assets.

Find a PancakeSwap broker

In order to buy and invest in PancakeSwap, find an online broker that supports BEP-20. This requires creating an account on the broker's website and crediting it. 

Before buying, however, always check that the price is up to date. Many online brokers offer charts that make it easy to invest live. As PancakeSwap is a new currency, it can be difficult to find many traders who offer it. Those that do include eToro, Libertex, Vantage FX and AvaTrade. 

CAKE is offered on many platforms, including Binance, BKEX, Digifinex, and VCC Exchange. Before choosing your online broker, however, check the crypto pairs it offers. This ensures greater liquidity to recover gains. This also ensures the ability to easily trade with other virtual currencies.

Identifying the right time to invest in PancakeSwap

It is advisable to buy PancakeSwap when the supply is higher than the demand to benefit from a reduced price. When the prices are rising, sell to make profits. It is therefore essential to pay attention to the volatility of the price, even if it is quite stable. 

In order to avoid losses, rely on a long-term strategy rather than on daily price fluctuations.

How to store your PancakeSwap tokens 

You can store your PancakeSwap tokens on the online broker's platform. However, for security reasons, it is recommended to use an e-wallet. Make sure it is compatible with BSC. 

You can use the online wallet MyEtherWallet or the Trust Wallet application. However, the best security for storing virtual currencies is to use a hardware wallet.

How to use the PancakeSwap platform

When using the Pancakeswap platform for the first time, you need to unlock some features by clicking on "unlock wallet". This allows you to have a choice of connections : MetaMask, WalletConnect, Trust Wallet or Binance Chain Wallet. In particular, MetaMask allows the use of the same address as on Ethereum.

For CAKE farming, it is enough to add liquidity. It is also possible to buy CAKE directly and to stake in the SIROP Pool. To do this, use the menu on the left and click on Trade > Liquidity > Add Liquidity, then choose a deposit pair. This allows you to receive LP tokens. These tokens are used to collect a portion of the platform's trading fees and can be exchanged for liquidity.

To harvest CAKE, users currently have about ten pairs of tokens : CAKE-BNB LP, BETH-ETH LP, USDT-BUSD LP, USDC-BUSD LP, BUSD-BNB LP, TWT-BNB LP, DAI-BUSD LP, LINK-BUSD LP. You just have to use the Farm menu and choose the liquidity pool that corresponds to your LP tokens. The operation includes two transactions, one to transfer BEP-20 tokens and the other to place the tokens to be staked.