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Into the World of Decentralized Exchanges: Pancake Swap



As the crypto industry continues to break new ground, the decentralized finance (DeFi) fire still burns brightly. However, the nuances and workings of the world of decentralized finance and exchanges are still a mystery to a good number of people. Taking the spotlight today is Pancake Swap, the decentralized exchange (DEX) hosted on the Binance Smart Chain (BSC) which recently topped the charts and briefly held the position as the world’s largest decentralized exchange by volume on 19th February this year. 

Still a fairly new DEX, at the time Pancake Swap was launched in September 2020 it did not receive much traction from the crypto audience. But as the BSC fame grew due to lower transaction fees and processing time than the Ethereum network, Pancake Swap grew in fame as well. Now, according to data culled from CoinGecko, it still sits among the top five decentralized exchanges by volume with a current trading volume at the time of writing of $598 million. 

Pancake Swap Is Not For Swapping Pancakes

Although Pancake Swap is named after pancakes and the exchange is filled with features named after other related food items and even animals, it is definitely not related to food or animals in any way. The best bet to explain the motive behind the whole makeup is that the founders probably had a serious liking for pancakes and rabbits.

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Overlooking the pancake word and cartoonish interface, Pancake Swap is a decentralized exchange that allows users to swap their BEP-20 tokens using an automated market maker (AMM). BEP-20 tokens are simply tokens that are hosted on the Binance Smart Chain. So for example using Pancake Swap, one can exchange Binance Coin (BNB) for Cardano (ADA) or even CAKE, the network’s native token for a fee. 

That is not all the platform offers though. Pancake Swap is able to process these exchanges by giving out BEP-20 tokens upon exchange request confirmations from existing liquidity pools. These liquidity pools are filled with the BEP-20 tokens other users have contributed. Users who choose to contribute to the liquidity pool are given liquidity provider (LP) tokens in return. These LP tokens enable them to reclaim their contributed BEP-20 tokens as well as a percentage of the fees collected by Pancake Swap during trades as profit for their good service. 

Farms, Syrup Pools, Lotteries, and NFTs

The benefits of liquidity provider tokens do not end in reclaiming contributions and receiving percentages of trading fees because Pancake Swap has created a merry-go-round of recyclable income throughout the platform. LP tokens can equally be used to farm for CAKE, the platform’s native token. 

Farming means all it implies in the normal sense of the word. Users who have liquidity provider tokens “plant” these tokens and harvest CAKE in return depending on the staking duration. Profits are calculated in form of Annual Percentage Rate (APR) mean and can be recouped on a daily to yearly basis. 

Also, users can put their CAKE in syrup pools. Pancake and syrup should ring a bell. In syrup pools, users stake CAKE or other tokens for a period of time to get new tokens which can range from more CAKE down to tokens like BEL of the Bella Protocol. Profits percentages are also represented in Annual Percentage Rate (APR) values. 

To add to the spice, users can also participate in lotteries on the platform to earn more CAKE and stand a chance to win Pancake Swap NFT collectibles that can be traded for CAKE equivalents. 

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Use Crypto To Print More Crypto

As highlighted above, Pancake Swap’s features coupled with its very welcoming user interface, creates a welcoming home for even the novice of the novices in the DeFi space. There is no need to have crypto tokens lying around in wallets, users can use their crypto to print more crypto for themselves. Most APRs on the Pancake Swap platform go as high as over 400%. 

One CAKE recently stands at a value of $11 at the time of the writing of this article. This is coming after its all-time high in the recent crypto bull run in February. 

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