A rapid and inexpensive decentralized exchange is PancakeSwap.
Decentralized finance (DeFi) is on the rise, and with it, new financial versions that center around autonomy, speed, and inclusion—components that are missing from traditional money.
This is particularly true for the emerging decentralized exchange (DEX) industry, where consumers interact with autonomous marketplaces supported by blockchain technology more often.
PancakeSwap, the BNB Chain (formerly Binance Smart Chain) version of decentralized exchanges like UniSwap (UNI) and SushiSwap, is a perfect example of such a market (SUSHI).
What exactly is PancakeSwap?
A native to the BNB Chain, PancakeSwap is a decentralized exchange. In other words, it is comparable to well-known platforms like UniSwap in that users may exchange currencies directly without the need of intermediary services.
The sole distinction is that PancakeSwap is concentrated on BEP20 tokens, a particular token standard created by Binance.
In order to work with the larger Binance ecosystem of dapps, wallets, and other services, new tokens must adhere to the BEP20 standard, which is effectively a checklist of tasks they must be able to do.
How PancakeSwap functions?
For those who are not aware with how decentralized exchanges operate, they employ a unique mechanism called an automated market maker (AMM) to eliminate the need for order books or a single, intermediate entity to conduct trade.
In essence, since traders deal with liquidity pools rather than counterparties, there is no requirement for an order matching mechanism. In this sense, the term “liquidity pool” refers to money put into smart contracts by investors, who can be anybody from anywhere in the globe, with the intention of giving traders access to liquidity.
This approach eliminates the waiting period between buyers and sellers or vice versa. When someone wishes to exchange one token for another, they just add their existing token to the pool and take out the desired replacement token.
For example, if you wish to convert a certain BEP20-based token, say ALPHA to BNB on PancakeSwap, all you need to do is identify an ALPHA/BNB pool with adequate liquidity (that is, enough tokens inside the pool to enable the transaction).
Then, after making a deposit of your ALPHA tokens, you would instantly get BNB in an amount determined by the most current exchange rate.
But PancakeSwap is not only for businesspeople. A liquidity provider is another position you may take (that is, you can deposit tokens in a liquidity pool for the chance of earning a share of trading fees paid by those trading against the pool in question).
Another way to make money on PancakeSwap is through yield farming. You may use this to farm for a token called CAKE.
Furthermore, if you correctly predict a set of winning numbers, you might win the lottery.
Introduction to PancakeSwap
Making a BNB Chain compliant wallet is the first step you must do before utilizing PancakeSwap.
There are other possibilities, including:
• Trust Wallet.
• BNB Chain Wallet.
• Coinbase Wallet.
You may use MetaMask as well, however you might need to set up your MetaMask wallet so that it can begin interacting with decentralized apps built on the BNB Chain, such as PancakeSwap.
By going to MetaMask’s Settings menu, you may accomplish this. Find the Networks option from here, and then select Add Network in the top right corner of the page. Following this, you will be sent to a screen where you may enter the following information:
Name of Network: BNB Chain
New RPC URL: https://bsc-dataseed.binance.org/
ChainID: 56
Symbol: BNB
Block Explorer URL: https://bscscan.com
You’ve now successfully linked your MetaMask wallet to the BSC mainnet version.
PancakeSwap’s addition of fluidity
You may begin engaging with dapps like PancakeSwap and adding liquidity to one of the pools on the site once your wallet is connected to BNB Chain.
Connect your wallet to PancakeSwap to accomplish this. On the homepage of PancakeSwap, click Connect Wallet in the top right corner to accomplish this.
Select Liquidity from the Trade option after connecting your wallet. Select Add Liquidity from the Liquidity page, then pick the token pair you want to deposit. Keep in mind that you must add both tokens to the pool according to a certain ratio.
The transaction will then need you to sign it using a wallet (which is free to do).
Following that, tokens known as liquidity provider (LP) tokens will be given to you showing your portion of the liquidity placed in the selected pool.
Farming on PancakeSwap
Once you acquire LP tokens, you may make use of them by putting them in a “farm” to generate CAKE tokens, the platform’s native money. Farms let you increase the interest you receive on your assets and are effectively LP staking pools.
The stages to farming on PancakeSwap are listed here:
• To access the sites where the available farms are posted, click the Earn menu on the PancakeSwap homepage and choose the Farms option.
• Look through the list of farms to find the one that can accept the LP tokens you now have in your hands. Consider the annual percentage rate (APR) provided to stakers as well.
• After choosing a farm, click Enable and then check the box next to your wallet to confirm the activity. The Enable button will then change to Stake LP, and when you click it, a page will open where you may input the quantity of LP tokens you want to stake.
• Your wallet will ask you to confirm the transaction when you click the Confirm button. Once you’ve done this, you may access your staked LP balance, which displays how much money you have in the farm.
• You may select Harvest to withdraw your profits and staked LP tokens at any time.
Staking on PancakeSwap
By staking your CAKE token on the platform’s Syrup pools, you may multiply your winnings. Select Pools from the Earn drop-down option to do this. The pools that are accessible, each pool’s annual percentage yield (APY), and the total amount wagered are all listed below.
You must first choose one of the pools. Then, by selecting the Enable option, you may start CAKE staking on your wallet. After that, enter the CAKE stake amount and press Confirm. Your profits may be automatically collected and re-staked in the same pool, depending on the pool you have selected.
Here is an example of how a normal yield farming approach on BNB Chain may look after breaking everything down:
• You obtain LP tokens when you deposit two tokens, in this case ALPHA and BNB, into the ALPHA/BNB liquidity pool. As a result, you may immediately begin to get a share of the transaction costs that traders who utilize the pool pay.
• The next step is to transfer your LP tokens into the proper “farm” in order to receive CAKE tokens.
• Finally, in order to earn more interest, you stake your CAKE tokens in a pool of syrup.
As you can see, by investing two tokens and participating in various staking pools, you may optimize your potential profits by receiving numerous yields.
Another business on PancakeSwap that claims to provide passive income is dubbed a “lottery,” but in contrast to the previous goods mentioned, this one is more akin to gambling since you must predict a successful four-digit combination made up of digits between 1 and 14. Examples are 2-8-10-14.
The system will automatically produce a random combination for you when you purchase a ticket. If your combination matches the winning ticket, you will be declared the winner at the end of the lottery session and get 50% of the total prize money. Remember that the numbers’ placements are also taken into account.
What happens, though, if your ticket doesn’t match the winning ones? If two or more of the numbers on your winning ticket match those on the winning ticket, you will still be eligible for awards. They must, however, be placed in the same order as the winning combination’s winning numbers.
