If you have been in crypto for any length of time and haven’t heard of pancake swap you aren’t doing crypto correctly.
A ridiculous name that gets me funny looks from my other half every time I mention it on the phone to someone who needs a hand. She now refers to me as the beefy pancake, it has got nothing to do with the lockdown weight…
Pancake Swap, in short, is a decentralised exchange (DEX). Unlike Binance, KuCoin, AAX etc. that operate on an order book model facilitated by a centralised exchange, Pancake Swap is what’s called an automated market maker (AMM).
For a full walkthrough of how to set up MetaMask and Pancake Swap head to our article HERE. This has been one of our best-performing articles and is a great indicator of the demand for this content.
So, as there is no order book model on AMMs, they require people to provide liquidity to allow others to trade. This comes in the form of effectively lending out your tokens making them available for others to trade. This is providing liquidity or being a liquidity provider.
How this works is people lock their coins up into a smart contract and act as liquidity providers of CAKE and BNB for example in the form of CAKE-BNB LP’s, more on this later…
People then trade directly with the smart contract. How this works is if you have provided CAKE-BNB LP (50:50 ratio of CAKE and BNB) then if someone on pancake swap wants to swap their CAKE for BNB or the other way around, they do so by interacting with the smart contract you provided liquidity to.
The beauty of a DEX is that they are permissionless, anyone can use them. There is no KYC and you can trade directly out of your web3 wallets like MetaMask and Trust Wallet.
They are quick, efficient and grant you access to projects before they get listed on the big tier one exchanges. Being early is a massive advantage in crypto. A listing on a big exchange can increase the demand for a certain coin and consequently the price.
There are downsides to DEX, like pancake swap too. A lot of scam coins can be made in a few hours and listed as the next big thing and people buy them.
This often leads to what is known as a rug pull. The scam artist behind the ‘project’ holds a ridiculously large portion of all tokens and slowly sells off their bags to people.
There are other means of “rugging” that are a little more complex but we won’t go into them here. If it seems too good to be true it probably is.
Pancake Swap’s CAKE tokens recent rise has been incredible, to say the least.
In less than 1 year the CAKE token has increased over 7160%… This is insane.
The best part… it may still have room to grow.
This incredible stat came out this week regarding the transactions on pancake swap amounting to nearly 69% of all transaction across the entire Ethereum network. Those are some insane numbers.
#PancakeSwap‘s router had nearly 900k transactions yesterday.
— PancakeSwap 🥞 #BSC (@PancakeSwap) April 9, 2021
This meteoric rise has landed CAKE as the top token by market cap in the Binance smart chain ecosystem (taking BNB and BUSD out of the equation that is).
Currently sat at number 40 in the coin market cap rankings, with a market cap of $3.5 billion, you can see why people are still incredibly bullish on CAKE.
The pancake swap dashboard is full of cool features that have been completely gamified and to great effect.
You can trade, provide liquidity, farm, earn another token called SYRUP, buy NFTs, enter the CAKE lottery and now join the Team Battle section which allows you to join a team and enter a trading competition!
I believe this gamification and user-friendly interface is really driving the adoption of the CAKE token and the use of Pancake Swap.
The cake lottery allows you to enter paying 1 CAKE per lottery ticket is an increasingly active section of the Pancake Swap dashboard. This week one user won over $555,000 in CAKE although, looking a little further into it this particular user spent 700CAKE on tickets!
— zy (@zy_zyyyyy) April 10, 2021
Not for me…
The grand prize was over $1m in CAKE for the first time but I can only see this increase with the recent coverage around this jackpot.
Initial farm offerings are a take on ICOs. Pancake Swap has a whole host of excellent projects launched from their IFOs including Berry, Soteria, Belt and more.
This is another great feature of their site as to partake in the IFO to be able to buy these newly listed tokens, you have to first buy CAKE-BNB and provide these tokens as liquidity.
CAKE used for this IFO is then burnt, decreasing the circulating supply of CAKE.
Admittedly, there have been a few issues with the IFOs though. Whales who buy a ridiculous amount of CAKE-BNB and stake this can often eat up a lot of the initial token being released and then see it dumped on the secondary trading market.
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A lot of other tokens just got massively oversubscribed which is fair enough, there is a lot of demand as an IFO from Pancake Swap gives credibility to a project.
The issue was a few of us at blocmates put nearly $1000 into the BERRY IFO and received about $12 worth of BRY. It was hardly worth our time.
There are plans for Pancake Swaps IFO 2.0 this seeks to remove whales from eating up the IFO tokens and also increases user activity and CAKE burns following the IFO.
The long and short of it is that users can partake up to $100 max or anything greater than that amount has to pay a participation fee. You must have a CAKE profile to enter and apparently more CAKE than ever will be burnt. Sounds promising and you can read more about it here on their official medium.
Negatives of CAKE?
There are a few arguments against CAKE. The main one comes from people who are Ethereum maximalists and see CAKE as a complete rip off of Uniswap. I can get behind this argument for only so long as Uniswap in its current form is just not usable.
Ethereum gas fees are pricing out the average retail investors. A transaction on Pancake swap might cost around $0.12, a transaction on Uniswap may be upwards of $50-100.
That being said Pancake swap did the most unapologetic ctrl + c, ctrl + v I have ever seen in my life. Almost as bad as BSC copying and pasting the Ethereum blockchain.
But this is an open-sourced world. You have to take both sides of it and accept that the industry definitely benefits from the open-source nature of it a lot more than it suffers. That being said Pancake Swap still makes reference to Uniswap in its code. At least try and cover your tracks…
Another really big factor that often gets overlooked is the infinite supply…
Don’t go selling all your cake there is a method to this madness. The current supply of cake is around 150m CAKE.
The amount of cake that is emitted into the ecosystem (Baked) is on its way to being less than the amount of cake burnt. This creates a net-deflationary token resulting in a decreasing supply of CAKE on the market.
This combined with the fact that the total value locked in the Pancake swap is well over $6 billion, the current market cap of $3.6 billion is still undervalued.
To summarise I love CAKE and for full disclosure, I hold a big portion of my portfolio in CAKE. The rewards in their pools and farms are excellent for newcomers to yield farming and it makes it an inviting place to start out.
There is a very active CAKE community and this seems to be very popular out in Asia.
Another thing that came up during one of the one-to-ones with an American friend was that CAKE is not available to trade on Binance US. With the new Binance appointed relations expert being an ex-US senator, I believe there will be a push to allow further access for US citizens to the full availability of coins on Binance sooner rather than later. But, this is the SEC, you never know…
Another imminent factor that will surely lift the price of CAKE is that Pancake Swap V2 is on the horizon.
The current road map is below from their Medium which you can read HERE.
In short; reduction of emissions further, lending and borrowing, further gamification, auto compounding with syrup and ongoing UX/UI looks great for CAKE in the near future.
Margin trading is also mentioned there which could be very interesting too.
All in all, I am very happy with CAKE and the progress it seems to be making. The only thing that could upset this is the current V3 plans for Uniswap.
Uniswap seems to be pivoting very hard and steering away from this kind of AMM structure. It is said to be a completely new and revolutionary way of doing things in DeFi and also their code this time is on lockdown.
That being said, don’t be surprised to see others take ‘inspiration’ from Uniswap in the further following V3, Pancake swap included.
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