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Pancakeswap: What is this food-themed DeFi protocol?

Thanks to Binance Smart Chain’s ability to run smart contract-based applications, several developers have produced various dApps that make each crypto trader’s life easier. One prime example of this is Pancakeswap, a decentralised crypto exchange used to trade BEP-20 tokens, the standard coins in the Binance Smart Chain. 

However, there’s more to it than that as the PancakeSwap cryptocurrency, CAKE is also worth every investor’s attention because of its extremely low trading fees as well as various staking options. Keep on reading to find out more about this food-themed DeFi Protocol!

What is PancakeSwap?

PancakeSwap is a decentralised exchange (DEX) built on top of Binance Smart Chain (BSC) back in September 2020 by a bunch of anonymous developers. Here, users can swap BEP-20 tokens with ease. 

BEP-20 is similar to the Ethereum network’s ERC-20 tokens in that they only have specific uses on their native blockchains. Many BEP-20 tokens run on the BSC, with each one having its own purpose, designated user and specific usage rules.

And unlike other exchanges that use order books to initiate trades, PancakeSwap follows an automated market maker model (AMM). This model won’t require you to go through an order book to trade with someone else but instead, you’ll be trading against a liquidity pool that lets you earn rewards and of course, increases liquidity.

These liquidity pools are filled up by users who deposit their own funds here. In return, they’ll receive liquidity provider tokens or LPs that can be used to claim their shares back but with an added portion of the trading fees.

How does PancakeSwap work?

In PancakeSwap, you’re allowed to farm and stake its native cryptocurrency, CAKE, to earn more. Here’s what you need to know about these two processes:

Farming

If you’re wondering where you can use the LP tokens you received from depositing your funds to the liquidity pools, this is the answer. In farming, you can lock these tokens up and be rewarded with CAKE.

PancakeSwap’s liquidity pools accept several BEP-20 coins for locking that then reward corresponding LPs you can deposit for farming. To learn which coins you can deposit and what you receive in return, check the list of offered coin and LP pairs below:

  • BUSD – BNB LP
  • BETH – ETH LP
  • USDT – BUSD LP
  • USDC – BUSD LP
  • DAI – BUSD LP
  • LINK – BUSD LP
  • TWT – BNB LP.

How to farm in PancakeSwap

Farming is relatively easy on the PancakeSwap website as it comes in a cartoonish interface that makes it easy to navigate. To start, all you need to do is go to the ‘Farms’ section on the PancakeSwap website. Here, you’ll be presented with different choices but the one you should choose should be the one that matches your LP tokens.

Afterwards, approve the movement of your BEP-20 tokens by confirming a pop-up prompt containing the transaction info and fee. You just have to click the Approve Contract button and the contract will then be allowed to withdraw BEP-20 tokens on your behalf.

Once you’ve approved the pop-up message, you can then proceed to choose how many tokens you want to stake. After that, all you need to do is confirm the transaction and you’re all set. You can leave the page then and there and come back whenever you want to check in on how many CAKE you’ve earned.

The CAKE you’ve earned through farming can be harvested at any time by simply clicking on the Harvest option and confirming that transaction afterwards.

Staking

After receiving your hard-earned CAKE through farming, you can then choose to stake them once more in something called ‘SYRUP’ pools where you can earn new tokens. To do this, all you have to do is go to the ‘Pools’ tab where you can access different pools and stake your CAKE.

This is a great way to earn passive income as you can stake your CAKE, leave them there and finally, earn new tokens in the process. These new tokens can be claimed at any time by clicking on the Harvest button. 

What is CAKE?

The native PancakeSwap Cryptocurrency is CAKE and it’s used to stake in one of the many liquidity pools in the decentralised exchange. Moreover, this is also what’s rewarded to users who stake their funds on the platform.

Lottery

Aside from being used to stake in liquidity pools to earn passive income, CAKE can also be used to enter a lottery on the PancakeSwap website which takes up to 6 hours. Here, you’ll have to spend 10 CAKE to buy a ticket for you to become eligible to join and get a chance to win the jackpot of 50% of the entire lottery pool.

Whether you’ve played the lottery before or not, you won’t have a hard time learning this feature. After buying a ticket, you’ll be given a unique four-digit sequence of numbers between 1 and 14. To win, the sequence shown in your ticket should match the one in the winning ticket.

Moreover, additional rewards or consolations will be rewarded to those who are lucky enough to match two or more digits.

Benefits of using PancakeSwap

Aside from the wonders of CAKE, PancakeSwap is a reliable DEX for various reasons. These include:

Low trading fees

One of the issues DEXs face is high trading fees. For one, the Ethereum-based DEX Uniswap has gas fees that continually grow by the day, hiking the trading fee and inconveniencing users. PancakeSwap users don’t have to worry about this problem since they will only have to pay a low gas fee of 0.2% when using the exchange’s liquidity pools.

Staking options

A huge benefit that PancakeSwap users can enjoy is the variety of staking options available on the blockchain network. On their website, you’ll find various pools providing high returns.

Should you invest in PancakeSwap cryptocurrency?

PancakeSwap is not your traditional DEX and in a good way. It offers tons of useful features including farming that allows you to generate passive income when they’re staked in one of the network’s many liquidity pools. So if you’re looking to invest in a cryptocurrency that yields high returns, this is the one for you.

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