Decentralized finance (DeFi) has produced new financial versions centered on autonomy, speed, and inclusivity, lacking in the traditional financial world. The mysterious PancakeSwap from Binance Smart Chain has grown in popularity among DeFi investors, competing with regular DEX options like Uniswap and SushiSwap.
What is PancakeSwap?
PancakeSwap is a native BNB Chain decentralized marketplace. It is similar to established marketplaces such as UniSwap because exchanges on PancakeSwap are automatically completed using smart contracts as a decentralized exchange, eliminating middleman risks.
Users can trade Binance Coin (BNB) and various BEP-20 tokens without depending on centralized services or risk losing control of their private keys on the platform. PancakeSwap has been certified by several prominent blockchain security organizations, including Certik and Slowmist, even though the team behind it is entirely unknown.
How PancakeSwap works
PancakeSwap is an automated market maker (AMM), a form of DEX. There are no order books, bid/ask systems or limit/market orders. Instead, participants dealing on the platform automatically draw liquidity from one or more liquidity pools, equalizing after each transaction.
Individuals known as liquidity providers (LPs) provide liquidity by adding equal amounts of both sides of a liquidity pool (e.g., BNB/USDC) to raise the overall amount of liquidity accessible. Users are given LP coins, which signify their share of the pool. Buyers do not have to wait for sellers to be matched with them, and sellers do not have to wait to be paired with customers. When someone wants to exchange one token for another, they deposit their current token into the pool and take the desired token.
For example, if you wish to alter a BEP20-based token, say ALPHA to BNB on PancakeSwap, you must now identify an ALPHA/BNB pool with enough liquidity (that is, enough coins in the pool to execute your transaction). Then you would need to transfer your ALPHA coins, and you would get a BNB equivalent depending on the latest exchange rate.
Another way to make money on PancakeSwap is to engage in Yield Farming. Customers can receive an additional return by staking supported liquidity provider (LP) coins in one of PancakeSwap’s multiple yield farms. Users can receive a CAKE yield on their LP coins by investing in a yield farm.
Getting started with PancakeSwap
To begin using PancakeSwap, you will need first to create a wallet that supports BNB Smart Chain (BSC). On both desktops and smartphones, wallets are accessible. You must select the wallet that best meets your requirements.
When creating a wallet, be careful that
- Only the most recent version from an official source should be downloaded and installed.
- Strictly follow the setup instructions.
- Back up your recovery phrases in a secure manner.
- Apart from your wallet app, NEVER enter your recovery phrase into a website or app.
MetaMask is a famous web wallet plugin that handles ERC20 by design and BEP2 & BEP20 (Binance Chain and BNB Smart Chain networks) with some effort.
Adding liquidity on PancakeSwap
By staking your FLIP coins and earning transaction fees and CAKE coins, you can provide liquidity to PancakeSwap pools (LP tokens). Click the “liquidity” button under the trading menu on the website to add liquidity to PancakeSwap pools. The payment will then require you to sign in using your account (which is free).
After that, you will get liquidity provider (LP) tokens, representing your part of the liquidity placed in the pool of your choice.
Farming on PancakeSwap
You may now take the benefits of your LP tokens by investing them in a “farm” to generate CAKE coins, the PancakeSwap platform’s native cryptocurrency. Farms are similar to LP staking pools in that they enable you to receive more return on your investments.
The stages of farming on PancakeSwap are described below.
- To get to the sites where the available farms are displayed, go to the Earn menu on the PancakeSwap website and choose the Farms option.
- Scan the list of farms to choose one that will work with the LP credits you have. It would be best to think about the annual percentage rate (APR) provided by stakers.
- After choosing a farm, go to your wallet and select Enable to complete the operation. The Enable icon will then change to Stake LP. To stake LP tokens, choose this option to be taken to a page where you can input the quantity you want to stake.
- When you press the Confirm button, your account will ask you to confirm the trade. After that, you will be able to see your staked LP balance, which will show you how much money you have on the farm.
- You can press on Harvest to withdraw your revenue and staked LP coins.
Staking on PancakeSwap
You can compound your profits by staking your CAKE coin on the platform’s Syrup pools. To do so, go to the Earn drop-down menu and select Pools. The available pools, annual percentage yield (APY), and the total amount staked are all listed here. Staking on PancakeSwap involves the following steps.
- You have the $CAKE tokens in a bitcoin wallet that supports PancakeSwap before you stake PancakeSwap coins.
- To examine all the individual liquidity pools that are available, go to the “Pools” tab. To earn extra CAKE, locate the CAKE liquidity pool and activate it by clicking the “Enable” option. Then, click Confirm after entering the quantity of CAKE you want to stake.
- Your income may be automatically harvested and re-staked in the same pool based on the pool you picked.
Here’s how a standard yield farming approach on BNB Chain may look after all of this.
- You put two tokens into the liquidity pool and get LP tokens in return. As a result, you can now start receiving a share of the transaction fees charged by pool users.
- After that, you deposit your LP coins into the proper “farm” to get CAKE coins.
- Lastly, you stake your CAKE coins in a Syrup pool to earn more.
Anyone can maximize their potential returns with numerous payouts by depositing two tokens and taking full advantage of several staking pools.
Hitting the jackpot on PancakeSwap
On PancakeSwap, another business is termed a “lottery” that offers passive income. This is more like a game of chance because in this, from the first fourteen digits, we will guess the winning four digits combination to win.
Click Lottery, then use CAKE tokens to purchase lottery tickets. If you put more CAKE into it, you will have a better chance of succeeding (since you have more tickets). You earn a portion of the entire CAKE pot if you match two or more of the winning numbers on your tickets. Lottery games are held numerous times a day – every six hours, to be precise. This ensures a high turnover rate and boosts your chances of striking gold in the long run.
When you purchase a ticket, the system will automatically produce a random combo for you. If your combination matched the winning ticket at the end of the lottery event, you would be declared the winner and receive half of the lottery pool. If two or more digits on your winning ticket match the numbers on the lottery bid, you will still be eligible for prizes. They should, however, be in the same sequence as the winning combination’s digits.
NFTs on PancakeSwap
Non-fungible tokens (NFTs) based on the BNB Chain can also be traded on PancakeSwap. On the BNB Chain, the PancekeSwap Non-fungible Token (NFT) exchange is one of the largest. Users can purchase and exchange unique NFTs on the protocol. With an easy-to-navigate User Interface (UI), the platform offers some of the finest collections in the market. Every NFT transaction on the market is deducted 2% by PancakeSwap, which is used to purchase back and burn its native $CAKE coins.