PancakeSwap is a decentralized exchange platform built on the Binance Smart Chain network. Through it, users can trade crypto in a variety of ways, as well as stake their holdings to earn profits over time. Further, users can farm the profits they obtain from staking tokens in liquidity pools, as well as participate in lotteries and exchange NFTs on the platform. What’s more, unlike Ethereum, PancakeSwap boasts competitively low gas fees.
How to trade crypto on PancakeSwap
PancakeSwap does not accept fiat payments. Thus, if you intend to trade on the platform, you will first need to buy crypto and store it in a digital wallet like MetaMask or Trust Wallet. Other compatible wallets include MathWallet, TokenPocket, WalletConnect, SafePal, and Binance Chain Wallet. To utilize MetaMask, for instance, all you’ll need to do is download a Chrome extension or download its application. With this wallet, you can interact with applications and tokens on the Ethereum blockchain.
Though PancakeSwap is hosted on the Binance Smart Chain, the network is compatible with the Ethereum Virtual Machine (EVM). This means that it is interoperable with the Ethereum network, and MetaMask is therefore compatible with all BSC applications.
Below are several ways of exchanging and earning tokens on PancakeSwap.
1. Token exchange
As aforementioned, PancakeSwap is inherently a decentralized exchange platform (DEX). Therefore, you can easily trade any of the tokens on offer on the platform. To do this, first load crypto funds into one of the aforementioned crypto wallets. Next, connect your chosen wallet to PancakeSwap. At the menu on the left hand-side of the platform, click on trade, then exchange. This will display a drop-down menu on which all the compatible tokens are listed.
On the from tab, choose the token you intend to sell. On the to tab, choose the token you intend to buy. This will then prompt you to enter the amount you wish to trade and adjust settings such as slippage tolerance and transaction deadline. Finally, click the approve button, then the swap button to complete the exchange.
2. Providing liquidity
Liquidity providers are a vital part of PancakeSwap’s structure. This platform works under an automated market maker model, which needs users to lend their crypto holdings to the platform for other users to trade with. These lenders are called liquidity providers, and the pool of resources they lend out is collectively stored in a liquidity pool.
In return, these lenders earn crypto tokens from the platform. The amount of tokens you receive depends on the proportion of your contribution to the pool’s value, and they are named according to the token pair you provide. For instance, if you deposit CAKE and BNB into a liquidity pool, you will receive CAKE-BNB-LP tokens. The platform charges 0.2% as transaction fees, of which 0.17% is distributed among the liquidity providers.
3. Yield farming
After earning liquidity provider tokens (LPTs), you can stake them in farms to earn more CAKE, the native token of the platform. This is known as yield farming, and each farm doles out yields by a specified annual percentage rate figure (APR). This APR often varies, so it is not uncommon for investors to move their LPTs across different farms. Additionally, each farm will have a multiplier listed next to it, which represents the amount of CAKE it receives per block. For instance, if a BUSD-BNB farm is assigned a 10* multiplier, the farm receives 10 CAKE for every block it produces.
4. Using syrup pools
Another offering of PancakeSwap is the syrup pools, which are somewhat similar to yield farms. In these pools, users can deposit their earned LP tokens and earn profits over time. The only difference is that the syrup pools require one type of LP token rather than the token pair required by yield farms.
Yield farms also offer higher rewards than these pools, but they carry the risk of impermanent loss. This is whereby your portion of tokens in the farm is valued less at the time of withdrawal than they would have been if they had been left out of the farm.
There are two types of syrup pools, a manual pool, and an automatic equivalent. The Auto CAKE pool will automatically harvest and reinvest any CAKE you earn from liquidity pools. The manual equivalent lets you decide when to harvest your earned CAKE tokens and whether or not to reinvest them. Other pools let you earn other tokens, but they still require you to stake CAKE tokens.
5. Initial farm offering
The PancakeSwap platform also allows its users to launch new tokens, which are then distributed to yield farmers through an initial farm offering (IFO). The farmers who buy into these farms provide funds for the new project. To launch an IFO, you must have an active PancakeSwap profile, which would set you back to 1.5 CAKE. Additionally, you can only stake CAKE-BNB LP coins, so you need to add CAKE and BNB tokens to a liquidity pool beforehand. Farmers also pay a participation fee, which is then converted to CAKE and burnt.
Other notable PancakeSwap features
This platform also offers additional features through which users can earn tokens. For instance, there is a lottery offering that works just like the typical lottery. The entry ticket costs one CAKE, and users get a random four-digit code. A raffle is held, and four winning numbers are announced. Anyone with two digits or more of the winning code in the correct order gets a portion of the jackpot.
One can also trade NFTs on the platform, as well as participate in predictions. Using the predictions feature, LP token holders bet on whether BNB’s price will rise or fall over a certain period. Winnings are then doled out depending on the value of their pool.
PancakeSwap is a decentralized exchange platform that works on the automated market maker model. Usually, users provide liquidity by staking crypto tokens in liquidity pools. In return, they earn CAKE tokens which can then be reinvested in farms through a process called yield farming. These CAKE tokens can also be invested in syrup pools or used to enter lotteries, participate in BNB price predictions or purchase NFTs on the platform. Users can also launch and sell new tokens via initial farm offerings.