DeFi investors have just discovered a new gold mine — PancakeSwap. Today, it is just as popular as common DEX assets (such as SushiSwap and Uniswap). This brand-new token of Binance Smart Chain is making the front pages, but how did it become so famous?
What should you know about PancakeSwap App?
PancakeSwap is the leading DEX on Binance Smart Chain and a strong rival to Uniswap and Ethereum. Its main benefits are high speed and low price of transactions. Since its foundation in autumn 2020, PancakeSwap has turned into one of the largest DeFi platforms with about 4 million users. It has such a great potential that it will probably soon outshine its creator!
But what is actually PancakeSwap? In this article, you will learn the basics of DEX, LP, and their advantages for investors. Although this decentralized exchange is another clone of Uniswap, there are many differences between them. The BSC-based system is not just another food-themed project and fancy word.
How to sell and buy on PancakeSwap?
As an AMM protocol, PancakeSwap provides attractive conditions for liquidity providers.
The platform has no centralized order book.
Users can swap between crypto assets by tapping into user-generated liquidity pools.
Any user can create a pool, put liquidity, and open up a new market.
Every time you exchange cryptocurrency, you are connecting to the user-generated AMM liquidity pools.
On PancakeSwap, users can trade only BEP-20 tokens, as it is Binance Smart Chain-based, and not Ethereum-based. But the owners of ERC-20 tokens are lucky too, as they can use Binance Bridge to wrap their assets. Swapping on PancakeSwap is much simpler, quicker and more flexible than on Coinbase or Binance.
Users staking the native BEP-20 token called CAKE obtain SYRUP rewards, which gives them the right to a share of CAKE emissions. This protocol is the best option for investors with limited financial resources who can’t afford gas fees.
Generation of liquidity pools is possible due to DeFi LP opportunities. Providers are increasingly switching to the innovative system. Since its introduction, about $1 billion in total value locked (TVL) has migrated to PancakeSwap.
PancakeSwap, SushiSwap, Uniswap – what’s the difference?
How is it PancakeSwap different from other large decentralized exchanges? All of them offer community management, yield farming, and liquidity providing opportunities. Nevertheless, Uniswap doesn’t give staking rewards to token owners.
Uniswap is an exchange protocol, which allows the users to trade ERC-20 tokens. This is an Ethereum-based platform with its own governance token. Uniswap mostly works with ETH pairs.
SushiSwap started as a fork of Uniswap, and then become DeFi platform. It has community governance and provides such opportunities as token swapping, yield farming, and crypto lending. The platform has a native token called SUSHI and a passive yield-bearing token called xSUSHI.
PancakeSwap is another Uniswap clone built on Binance Smart Chain. Its goal is to deliver fast and cheap trades using BEP-20 tokens (CAKE) and the BSC/ETH bridge. The platform has a profit-sharing token called SYRUP.
Users staking CAKE in SYRUP pools receive SYRUP in the ratio of 1:1. They also obtain the transaction fees from the protocol — 1/4 of CAKE emissions. All fees are distributed proportionately. This system is analogous to SushiSwap, where token holders obtain xSUSHI.
In Uniswap, UNI doesn’t contribute to generating wealth. It has a single purpose – governance. For this reason, lots of liquidity providers have given up on this DeFi protocol.
How to you yield farm LP Tokens?
This procedure is similar to yield farming on SushiSwap. In order to yield farm on PancakeSwap, you need to choose a pair of assets, connect a wallet and make a deposit.
Nevertheless, the price of depositing is lower, which is the main benefit for users. BSC is less expensive to use than Ethereum, since BSC is more centralized. This leads to an amazing scaling prowess.
PancakeSwap is much quicker than other platforms due to a high throughput. From the point of view of speed and price, PancakeSwap outperforms both Sushi and Uniswap.
Gamification in UX design
Sushiswap and Uniswap have very funny logos in spite of their serious activity. PancakeSwap is the best — apart from a fancy name and funny graphics, it holds a daily lottery. To participate in the lottery, users just need to deposit CAKE tokens and wait for the results.
The more coins you deposit, the better your chances of winning and the higher the risk. That’s is a simple but working system, and it’s extremely popular. The ad graphics are so cute!
A guide to PancakeSwap
In order to get started with PancakeSwap, you should connect your wallet to Binance Smart Chain. Adhere to the below-mentioned instructions before diving into trading. At the moment, this exchange supports 7 systems:
- Binance Chain Wallet
- SafePal Wallet
How to connect your wallet to PancakeSwap
Users can link their wallet via a smartphone or a combination of tablet and computer. Perform the following steps for PC browsers:
- Type pancakeswap.finance into the search field.
- Click on “Connect”.
- Choose “Wallet Connect” from the list, and a QR code will pop up on your PC’s screen.
- Run the wallet app on your device.
- Click on “Wallet Connect” in the settings.
- Scan a QR code.
- You will receive the message like “PancakeSwap wants to link to your wallet”.
- Link your wallet.
The last iOS version of the wallet doesn’t support the DApp browser. Nevertheless, you can link your Trust Wallet to Binance DEX in a matter of minutes using linking through the mobile browser.
How to link your MetaMask account to PancakeSwap?
If you want to connect your MetaMask wallet to PancakeSwap, you should do the following steps.
Press the button “Connect” in the top right corner.
Select your wallet from the list. You will see the Connections window.
Select the check the box with the name of your wallet.
Enable the system to see the addresses of your permitted accounts.
Press on “Connect”.
How to swap on PancakeSwap?
Trading on the decentralized exchange is very easy. Today, the PancakeSwap Safemoon BNB pair shows the highest liquidity. Perform the following steps:
- Go to pancakeSwap.finance.
- Select “Trade” from the menu.
- Press on “Exchange” and change the instrument in the middle of the screen to the option “Swap”.
- Click the dropdown menus to choose the cryptocurrencies that you want to swap.
- Press on “Swap”.
- Approve the transaction in your wallet.
A guide to Binance Bridge
Converting ERC-20 into BEP-20 tokens is very easy. You can do this in a few simple steps:
- Launch the Binance Bridge.
- Link your wallet.
- Enter the name of the token that you want to bridge.
- Approve the transaction on Ethereum.
Once you’ve finished your activities on PancakeSwap, you can convert your assets back from BEP-20 to ERC-20. To do this, you should undertake the above-mentioned steps on Binance Bridge, but in reverse order.
A certain amount of ETH is charged for each transaction. Even though the initial expense may be high, you should be forward-looking. PancakeSwap allows users to save much money in trading commissions once your assets have been wrapped and transformed to BSC.
Apart from wrapping assets, Binance Bridge has many other functions, such as yield farming and liquidity provision.
How to provide liquidity on PancakeSwap?
Users who provide liquidity are rewarded, which makes this automated market maker liquid for exchange. It is very simple to join the provider pool:
- Press the button “Liquidity”.
- Choose “Add liquidity”.
- Indicate a pair of tokens you want to add liquidity to (remember to unlock the wallet before this).
- Make a deposit by clicking on “Confirm the transaction”.
Your first deposit will be rewarded. You will obtain a liquidity provider token named FLIP, which will serve as a representation of your share in the pool. The owners of FLIP tokens receive a part of rewards whenever an exchange transaction is added to their pool’s liquidity. To receive this bonus, they should redeem their FLIP tokens. This action unlocks the fundamental assets, which will be already evaluated by this time.
Please note that:
- On PancakeSwap, liquidity is always provided in pairs, so you need to select two tokens.
- Users can provide liquidity in an existing pool or build a new one. The last option is usually selected by the projects aimed at presenting their own token on PancakeSwap.
How to yield farm on PancakeSwap?
There is a big difference between yield farming and liquidity mining. Liquidity providers add pairs of assets to a pool for exchange operations, and the cost of these assets increases with time. In yield farming, users have to deposit one type of assets to have other tokens released.
- Click the “Farms” tab.
- Press the button “Live farms” to see the current situation.
- Select the farms from the list (it is very long and includes lots of farms with BUSD and BNB trading pairs).
- Press the button “Details” on the chosen farm to find out how much CAKE it accumulates.
- Connect your wallet to PancakeSwap so that the platform can autodetect the available currencies.
- Make a deposit to the farm.
With all steps above finished, you will see how much CAKE you’ve gained. To date, the farming yield is high across a few currency pairs. Some farms (for example, DUSK-BNB) earn more than 200% per year.
How to stake in Syrup pools
As we said earlier, owners of CAKE tokens are rewarded with LP tokens. To obtain BEP-20 tokens, you need to stake your CAKE in SYRUP pools.
The main benefit for the user is obtaining a new token that may increase in value with time. But what does PancakeSwap gets out of it? The answer is simple: an additional liquidity and a new instant exchange listing. If you want to find out how to join to Syrup Pool, keep reading:
- Press the button “Pools”.
- Choose the pool that you find most interesting.
- Make your first deposit.
Explore available pools to find the most attractive opportunity. As soon as your CAKE has been deposited, you will receive new tokens.
Common mistakes and possible solutions
Many users make mistakes when linking their wallets or exchanging assets. Most of them have appeared after the migration from V1 to V2 (an upgrade that came out about a year ago). The change resulted in new DeFi contract features, but it was far from perfect. Below are the most widespread mistakes and proven solutions.
- Users who exchange tokens may face with such error as “Insufficient Output Amount”. This means that you need to increase your slippage tolerance. This term refers to the minimum sum you’re ready to take irrespective of price fluctuations. Try to raise the tolerance by 1% percent until the error is solved. Users also receive this message if they try to exchange fake tokens.
- The message “Price Ompact Too High” means that the user can lose a a large portion of his/her funds when swapping tokens. To solve this problem, you can try to switch over to the V1 version, since most tokens are still locked in this liquidity pool. But if you’re using V1, try switching to PancakeSwap v2. If it doesn’t help, just cut the number of purchases and breaking down your transactions. Changing the price slippage may also may be a solution.
- “Insufficient liquidity for this trade” is another common mistake resulting from migration to V2. Adjust slippage tolerance to 12% through the exchange settings.
- When purchasing or trading a token, you may receive the following notification “Cannot Estimate Gas”. This usually occurs to such tokens as Bonfire and Safemoon. However, this error may also mean failure to estimate the transaction charge because of excessive number of decimal places in the number of tokens. Raise a slippage tolerance to 12% and change the number of tokens.
- In the process of linking your wallet, you may receive the notification “Unsupported Chain ID”. This means that the token you want to exchange doesn’t support the token that you want to exchange. To solve this problem, you should have enough Binance Coins in your wallet. After making a deposit, you should switch from Ethereum to BSC (but not in a browser.
- If you’re trying to connect to Trust Wallet on the browser version of PancakeSwap, you may encounter the following error: “No Provider Was Found”. To fix this problem, you should enable DApp on Trust Wallet.
Because of high market volatility, cryptocurrency trading feels similar to gambling. PancakeSwap offers you an opportunity to get a good extra profit. Sound like a lottery, right? The only requirement for participation is depositing your CAKE DeFi account.
Press on “Lottery” and buy as many tickets as you want for CAKE tokens. The more tickets you buy, the higher your chances of winning. To win a share of the CAKE pot, you must have at least two matching numbers.
PancakeSwap Lottery takes place four times a day, so you can win every six hours. This provides considerable turnover, while your odds of winning remain unchanged.
What is IFO on Pancake Swap?
The initial farm offering (IFO) is a new ICO model that PancakeSwap is spearheading. It allows CAKE-BNB liquidity providers to buy tokens of an innovative project. All they have to to do is deposit their liquidity pool tokens on the relevant IFO page.
Users who don’t hold any CAKE-BNB LP tokens should get them first:
- Buy BNB and CAKE tokens based on how much you’d like to contribute: split the total amount in half between BNB and CAKE.
- Add the tokens to the liquidity pool to receive the bonus LP tokens.
- Return to the IFO page.
- Deposit the LP tokens you received.
The project’s tokens will be provided after the IFO is finished.
Is PancakeSwap secure?
PancakeSwap has been working flawlessly for almost two years. It has been inspected by CertiK, one of most heavily backed blockchain security companies. Using PancakeSwap is completely safe.
But there’s another question: is PancakeSwap legal? Totally. Nevertheless, certain assets traded on this platform may be sketchy. Prior to receiving a new token, you should check its latest transactions.
PancakeSwap or Uniswap: which is better?
Now you understand how to create PancakeSwap account and realize its full potential. But is it better than SushiSwap and Uniswap and other similar exchanges? There is no clear answer to this question.
Although PancakeSwap has almost the same liquidity as Uniswap, it is much faster and more affordable from the user’s point of view. On the negative side, the owners of ERC-20 and BEP-20 tokens had different experiences. Unless you own BEP-20 tokens and wish to remain on Binance Smart Chain, you need to convert your assets.
Binance Bridge, which comes in and out of Ethereum, is very expensive to use. The protocol is not fully decentralized, so Binance Smart Chain is not actually DeFi. Still, PancakeSwap is developing constantly, and soon users will have no problems storing their assets on this platform.