Away from the centralized operations of cryptocurrency exchanges like Binance and Coinbase that are characterized by a single corporate entity, decentralized exchanges (DEXs) avail trade without a third party. Meanwhile, most of these decentralized exchanges are based on Ethereum, where loads of decentralized finance (DeFi) actions occur.
The narrative surrounding PancakeSwap is different as it is built on Binance Smart Chain instead of Ethereum, and which as a result offers a lower trading fee. Binance Smart Chain is newly developed than Ethereum, albeit PancakeSwap is gaining ground amongst other DEXs.
What Is PancakeSwap?
PancakeSwap can be described as a decentralized exchange that avails you to trade crypto and digital tokens devoid of a centralized third party, thereby owning up to your tokens. Built on automated smart contracts designed on Binance Smart Chain, the blockchain is powered by the Binance exchange.
Although Binance works with a centralized exchange, its control and operation do not affect PancakeSwap. This is because the feature was built by a team of anonymous developers. In this case, the service is in a way similar to the common Ethereum DEX.
PancakeSwap is exclusively used for BEP-20 tokens on Binance Smart Chain. Nonetheless, it is a possibility to bring tokens from other exchanges through Binance Bridge and get them “wrapped” as a BEP-20 to be used on the DEX.
PancakeSwap is created on an automated market maker (AMM) system, similar to how other DEXs we’re built. However, its reliance is solely on user-fueled liquidity pools to enhance cryptocurrency trades. Here, users often lock their tokens into a liquidity pool instead of operating with an order book to find people who want a swap for the digital tokens you have for the ones you want.
How PancakeSwap Works
In a reprisal of the above description, PancakeSwap users can exchange one type of token for another without a third party, while other staked-token users in the liquidity pools receive a share of the rewards generated by transactions.
PancakeSwap is created to offer game-like experiences, such as placing predictions on if the price of Binance Coin (BNB) will rise or fall within a certain time range. In addition, It has a lottery feature that allows users to make purchases of tickets to win a major windfall of CAKE, including the decentralized exchange that offers a large number of non-fungible tokens (NFTs) to buy. The Initial Farm Offering (IFO) feature on PancakeSwap enables sales that new coins from budding projects to be bought.
How To Use PancakeSwap
To get started with using PancakeSwap as a beginner, a crypto wallet is required, because the decentralized exchange does not work with fiat currency. Wallets like Binance Chain Wallet, Trust Wallet, and MetaMask. Interestingly, loads of personal data are needed as the case is in centralized exchanges, hence there is no profile creation.
1. Open PancakeSwap
2. Connect your preferred wallet. Ensure there are some BNB in your wallet to pay for the transaction fees.
3. Select the tokens you want to swap and enter the amount.
4. Click on ‘Swap’ to start the transaction.
5. Verify and validate the transaction from your wallet.
The Use Of CAKE Token
In its bid to annul an outright reliance on centralized exchanges, PancakeSwap opts for the adoption of the democracy model. What this means is that you must own CAKE tokens before you can have voting rights under this innovative approach. This is geared at having a protocol upgrade and tweaks in fee structure.
Today, the price of CAKE is $15.90, with a market capitalization of over $3 billion. Concerning its market cap, CAKE is ranked 48th among over 2000 cryptos. Considering the depth of its liquidity in the secondary markets, CAKE can be bought from platforms like Prestmit, Binance, KuCoin, etc.