PancakeSwap DeX (Decentralized exchange) (EXPLAINED)
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In this article of Inside Press India, today we will take you into the world of cryptocurrency and will talk about a crypto currency exchange PancakeSwap.
In this article today we will tell you what is Pancake Swap Exchange? What technology is it based on? And what are its use cases?
But before proceeding, let us tell you that in this article different types of words like cryptocurrency, bitcoin or blockchain have been used. If you want to know more about them, then articles are also given about them on our website, you can go there and understand better about them.
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Pancake Swap is a decentralized exchange (DeX). It is based exclusively on the use of swapping BEP-20 tokens.
BEP-20 tokens are tokens that do not have their own blockchain system but work on the blockchain system of Binance SmartChain
Most of the swap exchanges work on Ethereum’s smart chain but Pancake Swap is specially designed based on Binance smart chain which has its own distinct advantages which we will talk about late. If we talk about the earnings of crypto investors from this pancake swap, then it has brought tremendous benefits to the investors so far.
Pancake swap was launched by anonymous developers with an Apparent passion for pancakes. It launched in September 2020 as a decentralized exchange for swapping BEP20 tokens on binance smart chain.
It would be pertinent to mention one thing here that what are decentralized exchanges after all? So let us tell you that decentralized exchanges are those in which cryptocurrency users are able to do peer to peer( P2P )transactions directly with each other. Decentralized means that there is no central authority in the middle. Such decentralized exchanges work on special automated smart contracts. Like Pancake Swap works on Binance Smart Chain. However, all decentralized exchanges operate on different types of smart contracts
The most popular pairs of transactions on PancakeSwap include swapping from BNB to PancakeSwap’s native token CAKE. Swapping from BNB allows keeping a single source for both swapping and transaction fees, and thus more manageable. This technique has played a key role in the popularity and the pump around the price of BNB.
Here let us inform you about one more basic thing. You may have come to mind that what are ‘swap’ after all? Like here we are using swap in front of pancake. What are these swap tokens after all?
Let us tell you that there are two types of terms CEX and DEX. However, there is no particular difference between these two. The term swap is used in relation to DeX (decentralized exchange). The function of swap is to exchange one token from another token. ( A simple example would be to exchange USDT for ADA). However, unlike CEX, a minimal transaction fee is always charged in BNB instead of trading fees. It is advised to conduct transactions that hold more monetary value than the transaction charges.
Use Cases of PancakeSwap:-
PancakeSwap uses an automated market maker model, meaning that there are no order books and liquidity pools are used instead. A user can earn income by becoming a liquidity provide; by adding their tokens to the liquidity pool they can farm LP tokens and stake their CAKE to earn rewards. They can also try their luck with the lotteries and non-fungible tokens.
It’s impossible to talk about PancakeSwap without mentioning its main rival and largest competitor, Uniswap (UNI), which is based on the Ethereum blockchain.
If we talk about uniswap and pancake, then uniswap is quite old and more in vogue. But some of the problems of Uniswap seems to solve by Pancake Swap. As uniswap works on Ethereum’s blockchain. And the problem with the Ethereum blockchain is that the fees in it increase daily. And yet Ethereum 2.0 has not even been launched, after that the situation may be different.
On the other hand, pancake swap has solved this problem. Pancake itself does not charge more than 0.2 percent of the fees for users using the liquidity in its pool. With this, traders and big investors also get a higher profit margin. This kind of management is too good for any token for its price.
Competitive transaction fees are among the main drivers of this network’s popularity, and are a key explanation as to how PancakeSwap has attracted such an enormous community of users. A quick look at social media will show just how passionately many investors feel about this project.
One of the best uses of pancake swap is its staking options. Now let us tell you what is staking? In order to validate transactions on the blockchain or to provide liquidity to a decentralized exchange, exchanges offer their investors the special facility that they lock some of their tokens for a period of time. And in return, exchanges give them some amount of the same coin as a gift after that time period. By doing this exchanges are also able to maintain their liquidity regularly.
Through staking, investors can earn additional tokens on blockchains using a proof-of-stake validation model, or in liquidity pools decentralized exchanges use to facilitate trades.
Just as we told you that exchanges give some amount as a reward on their staking. So here, by looking at the annual percentage return of crypto investments on various platforms, investors decide in which token they want to invest their money. Let’s see what you get when you stake the cake in the syrup pool on Pancake Swap. There are currently 16 tokens available to bet on the network’s pool, with the most widely used pool being Autocake with an APY of 72.70%. Well there are other pools that have a higher reward than this.
Probably the best thing about the Binance smart chain is its liquidity. PancakeSwap boasts the largest number of daily users of any dApp, and has the fourth-highest market volume. It has amazing wallet integration and supports popular wallets like WalletConnect, MathWallet, TokenPocket, TrustWallet, and even MetaMask.
Cake has extremely high daily volume, and that’s great news for an investor looking for a token to stake. It’s effortless to get in and out of Cake. Not every token in the cryptocurrency space can say that. In fact, most can’t.
Cheaper + faster transactions:-
Additionally, PancakeSwap is less expensive and faster to use than both Uniswap and Sushi. The reason is PancakeSwap is built on Binance Smart Chain, a high-throughput blockchain built by Binance to compete with Ethereum.
BSC achieves its scaling prowess in part by being less decentralized than Ethereum, but that doesn’t seem to deter users from taking advantage of its barely-there transaction fees. Trading on PancakeSwap is undeniably better for smaller wallets who can’t quite call themselves crypto whales and don’t have unlimited funds to drop on gas fees.
Accessing PancakeSwap is still familiar for Ethereum users since you can connect to the exchange using Metamask, just like you do when using Uniswap and SushiSwap.
Gamified exchange experience:-
PancakeSwap, takes the fun to a new level with PancakeSwap Lottery. Every day, users deposit a number of CAKE tokens into the lottery then wait for the winning numbers to be announced.
The more deposits, the larger the pot, and the greater the stakes. To increase your odds of winning, you deposit more CAKE. The mechanics of the Lottery are simple yet brilliant, which explains why it’s such a hit with users.
How to use PancakeSwap (Dex) Platform:-
So till now we have told you how pancake swap has solved a big problem in the best way and how and in which areas it is being used. Now we will tell you how you can use the Pancake Swap (DeX) platform. So let’s get started. Before proceeding further, we want to tell you one more thing that you may have read somewhere that Pancake Swap also refers to itself as Automated Market Maker. So let us tell you that this is another word used for exchanges only.
If we tell you in brief, such automated market makers like pancake swap or uniswap are all decentralized liquidity protocols which are used to maintain the liquidity of any platform. As we have told you that they are specially used while exchanging one coin to another.Users like yourself provide liquidity so that other users can seamlessly swap tokens using the decentralized exchange.
To use Pancake Swap (DeX), first go to the pancakeswap.finance website and click on Trade in the menu
Doing so gives you two options there. The first is exchange and the second is liquidity. Now click on Exchange to toggle the tool on the center of your screen to the swap option
Now there you can select which cryptocurrency you want to swap. The interesting thing here is that when you trade crypto on Pancake Swap you are exchanging against AAM liquidity pool generated by users instead of order book.
This makes swaps easy, fast, and flexible compared to a centralized exchange since anyone can create a pair, provide liquidity for it, and thus open up a new market for the DEX.
Once you’ve selected the pair you want to exchange, hit the Swap button, confirm the transaction in your wallet, and that’s all.
But here we want to remind you once again that on Pancake Swap you can only swap BEP-20 tokens because as we have talked about Pancake SWAP is based on Binance Smart Chain and not on Ethereum Smart chain.However, even if you only hold ERC-20 tokens, you’re in luck — just use the Binance Bridge to wrap your assets for use on PancakeSwap.
Now we have a question for you. You read from the beginning that on Pancake Swap you can only swap BEP-20 tokens but do you know what are these BEP-20 tokens. NO, RIGHT?
So in brief ,BEP20 token is a cryptocurrency token which is developed from the Binance Smart Chain Blockchain platform. Therefore, it is named after its native blockchain platform as BEP20 token, which is now trending the global market mainly in the DeFi platform. BEP20 token is used in DeFi protocol like Uniswap, PancakeSwap and others.
Some Examples of these BEP-20 tokens are-
BUX Is PancakeSwap better than Uniswap?
You’re probably wondering if PancakeSwap is better than Uniswap or rival exchanges like SushiSwap.
The short answer is no, but it isn’t a long way off. There is plenty of liquidity on PancakeSwap, making it a great decentralized exchange.
But, since PancakeSwap is on Binance Smart Chain, and BSC isn’t fully decentralized, we hesitate to call it a true decentralized exchange. Not being fully decentralized does have its advantages though.
For one, PancakeSwap is much faster and cheaper to use than Uniswap and has similar levels of liquidity. The only issue there is if you want to trade ERC-20 tokens, you’ll need to use the Binance Bridge coming in and out of Ethereum, which, depending on gas costs, can be prohibitively expensive for some.
But the experience of Pancake Swap is good for all those who have BEP-20 token and want to do their work on smart chain of Binance.(Note- The above comparison is for educational purpose only. Please consult your advisor before using.
So friends, in the article written above, we have tried to explain to you how pen cake swap is working on what principle in the world of cryptocurrency. What is its use? And how can you use it. Hope you liked this article of ours. Please do give us your suggestions in the comment box. So that we can make our articles better. All your suggestions are very important for us. And don’t forget to share our articles with your friends and family.
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