Another food-themed DeFi protocol? You know that. PancakeSwap is a DEX based on BNB Chain (formerly BSC and Binance Chain) released by anonymous developers.
It looks similar to Ethereum's SushiSwap (community governance, LP Token farming capabilities), but also incorporates some type of Staking mechanism.
The food-based farming craze has been attracting participants to the crypto space for months. In the latest wave of DeFi protocols, we have seen many platforms emerge that allow users to Stake their coins in return for protocol Token .
Much of this activity is focused on the Ethereum blockchain. As one of the earliest smart contract-enabled blockchains, it has a large community of users, developers, and tools to build powerful decentralized applications (Dapps).
In this article, Bitcoin Magazine will introduce to you PancakeSwap, a decentralized exchange (DEX) built on BSC.
PancakeSwap (CAKE) is a popular DEX and Non-Fungible Token Marketplace platform today, built on BNB Chain. It allows trading of BEP-20 Token thanks to the automated market maker (AMM) protocol on BNB Chain easily.
The original idea of DeFi and DEX is to decentralize global finance. The vision that cryptocurrency experts have drawn is a system that does not need traditional centralized exchanges. The two leading names in the market at that time were Uniswap and SushiSwap. However, the majority of dApps developed on the Ethereum blockchain suffer from a common system problem. Dependence on the Ethereum network has created many challenges in terms of transaction speed and high Gas Price , making them not as effective as expected.
Officially launched on September 20, 2020, PancakeSwap is highly expected by Binance to become the optimal solution, as well as a top candidate with great features, focusing more on performance. .
PancakeSwap operates on BNB Chain. Instead of the traditional market model, it uses an AMM model. In this AMM model, traders buy and sell digital assets using liquidation pools without third-party licensing. Participants deposit funds into these liquidation pools and receive LP (Liquidity Provider) Token in return. They are also paid a fee for lending assets. In turn, those who want to use this liquidation must pay fees to the DeFi platform. Specifically, on PancakeSwap, traders can use liquidation from these pools and pay a 0.2% fee for DeFi. This fee is then distributed to the members contributing to the pool. Besides, 0.17% of them are retained to be included in PancakeSwap 's budget for the purpose of maintaining and upgrading the platform.
Below is a summary of how blockchain works on PancakeSwap:
As mentioned, CAKE is a multi-utility platform Token , the main coin of PancakeSwap. More than just a ticket into PancakeSwap, CAKE is also used on many other platforms within BNB Chain's dApps. The PancakeSwap ecosystem has introduced three other CAKE-related Token : vCAKE, bCAKE, and iCAKE. Below is basic information for you to have an overview of CAKE.
PancakeSwap uses four main Token : CAKE, vCAKE, bCAKE and iCAKE. Each type of Token has a distinct function and purpose:
Easy connection : PancakeSwap 's developers are well aware that Ethereum is dominating the DeFi space, and most first-time users of PancakeSwap appreciate the compatibility between the two technologies. Therefore, this project was created with the purpose of strengthening connection. Not stopping there, PancakeSwap also supports many popular wallets such as MetaMask, which stores and manages both BEP-20 and ERC-20 standard Token . PancakeSwap has also listed multiple Ethereum-based coins on its exchange, making it easy for users to move between the two chain .
Easy to use : PancakeSwap 's user interface is designed to be clear and simple, making it easy to navigate and use, even for beginners. Its performance provides a very comfortable and reputable trading experience. The platform minimizes too much information at once, ensuring users never feel overwhelmed.
Exceptional transaction speed : PancakeSwap offers faster transactions thanks to its sophisticated network, so traders rarely miss trading opportunities due to performance issues. They can be more proactive in responding to every trading stimulus, making profits by staying ahead of the game.
Cheap transaction fees : With the overload on the Ethereum network, its transaction fees sometimes reach up to 20 USD per transaction. In contrast, on PancakeSwap, the Medium cost is around $0.08 per transaction. This disparity is one of the main reasons why PancakeSwap is becoming increasingly popular.
chain transaction complexity : Using PancakeSwap, primarily on BNB Chain, can be complicated, especially when dealing with assets originating from other blockchains such as Ethereum. Understanding tools like Binance Bridge is essential for these transactions.
Risks in Speculating : Like any other DEX, PancakeSwap provides liquidation to many pools. Investors may suffer permanent losses. There are many projects that are unknown to investors and have input risks. ERC-20 holder who want to convert to BEP-20 Token will have to use a bridge to make this conversion.
Decentralized market risk : PancakeSwap is a project running on BNB Chain, this can be a risk if there are any related issues that directly affect PancakeSwap.
System risk - Smart contract : Smart contract is an important part of the PancakeSwap system. If there are errors in the Smart contract or the system, it can lead to security issues and Capital loss.
Legal risks : DeFi projects face legal risks, especially with increased attention from regulators and changes in regulations.
Overall, it would not be an exaggeration to say that PancakeSwap is a strong competitor of two other technology projects, Uniswap and SushiSwap . As a reliable protocol with unique features, PancakeSwap provides users with convenience in transactions and monetization activities that are not limited to coin trading. However, it still has disadvantages besides outstanding advantages that you should consider carefully before using. Hopefully this knowledge will provide you with useful information. Please read more articles on the BlockchainWork website every day to gain more useful knowledge about blockchain technology!
Join Bitcoin Magazine's Telegram: https://t.me/tapchibitcoinvn
Follow Twitter (X): https://twitter.com/tapchibtc_io
Follow Tiktok: https://www.tiktok.com/@tapchibitcoin
Mr. Giao
Bitcoin Magazine
