The leading decentralized exchange on BNB Chain, PancakeSwap has released Version 3 of its AMM DEX on the Ethereum and BNB Chain network.
According to the exchange’s developers, the updated platform would deliver improved profits for liquidity providers and the lowest rates for on-chain trades among peers like SushiSwap and Uniswap.
The upgrade to PankcakeSwap V3 introduces features that will upscale the platform’s capital efficiency. They include enabling liquidity providers to focus their capital on smaller price ranges, a characteristic that leads to better fee earnings from the same amount of deposits.
PancakeSwap V3 offers four trading charge tiers; 0.01%, 0.05%, 0.25%, and 1%. V2 only offered one tier, which was 0.25%. Each fee tier can have a liquidity pool for each token pair, with asset pairs tending to gravitate toward the fee tier with the best incentives for both liquidity providers and traders.
By encouraging the largest amount of liquidity from Liquidity Providers, this strategy aims to strike a balance between traders paying the lowest fee tier and other participants.
Two additional features will be added to PancakeSwap V3 in the future: a position management function and the V3 “VIP” trading rewards program.
The VIP program is a tiered structure that rewards traders for their trading volume with special advantages including the potential to receive a 5% trading fee rebate – which may encourage more platform activity and increase PancakeSwap’s revenue.
Using the “position manager” feature, traders can seamlessly deposit liquidity and gradually optimize that position based on costs and benefits. By doing away with the necessity for manual calculations for third-party integrations, the tool enables users to automatically alter their positions and earn fee incentives while remaining within bounds.