Guide to using PancakeSwap

Binance Academy · 2022-11-30T14:17:20.000Z
Carefully! Lots of text. Yes, this is another DeFi protocol with a food theme. PancakeSwap is a DEX powered by Binance Smart Chain, launched by anonymous developers and dedicated to the theme of bunnies and pancakes. It is a bit similar to SushiSwap on Ethereum in that it is also community-driven and allows for the creation of liquidity provider tokens. However, PancakeSwap includes many other features with the possibility of earning rewards.
Carefully! Lots of text.
PancakeSwap is a decentralized exchange (DEX) available on multiple blockchain networks.
It uses an automated market maker (AMM) model where trades are executed through liquidity pools rather than traditional order books.
PancakeSwap offers a wide range of products and features, including token swaps, liquidity pools, yield farming, limit orders, NFTs and Web3 games.
ВведениеThe rise of decentralized finance (DeFi) has changed the way trading and investing work. The adoption of blockchain allows DeFi platforms to provide increased transparency, autonomy and accessibility to financial services.
In the early years of DeFi protocols, many platforms and decentralized exchanges (DEX) emerged. They initially focused on the Ethereum blockchain due to its smart contract capabilities. Now, several DeFi platforms have emerged on a variety of networks, including BNB Chain, Polygon, and Solana.
These smart contract-enabled blockchains have a growing community of users and developers, as well as tools for creating powerful decentralized applications (DApps). In this article we will look at the decentralized multi-chain exchange PancakeSwap.
What is PancakeSwapPancakeSwap is a decentralized exchange (DEX) launched in 2020. It was initially used to swap BEP-20 tokens onto BNB Smart Chain (BSC), but then expanded to other chains.
PancakeSwap currently supports ERC-20 and other token standards. In addition to BSC, the exchange is available on other blockchains such as Ethereum, Polygon and Arbitrum.
Exchange PancakeSwapPancakeSwap uses an automatic market maker (AMM) model. Users can trade digital assets on the platform without relying on a centralized exchange. It does not use an order book to match trades, but instead users trade through liquidity pools.
Users contribute funds to the pool and earn liquidity provider tokens (LP tokens). They are needed to withdraw funds from staking and pay trading commissions. In other words, users can trade tokens or add liquidity to earn rewards.
PancakeSwap V3PancakeSwap V3 was launched in April 2023. This version introduces new features and product updates, including non-fungible liquid positions, customizable price ranges, expanded liquidity, and improved trading efficiency.
Let's look at the key features of the PancakeSwap exchange.
Key Features of PancakeSwapLiquidity poolsPancakeSwap's liquidity pools play a key role in the token swap process. Users can add liquidity to pools and earn LP tokens in return, which not only represent their share of the liquidity pool, but also earn rewards in the form of trading commissions.
Yield farming allows liquidity providers to earn additional rewards (e.g. CAKE tokens) for locking LP tokens into smart contracts. Through Initial Farming Offerings (IFOs), users can purchase new tokens in limited-time events.
Token swaps and Smart RouterThe Smart Router facilitates token swaps on PancakeSwap by routing trades through various liquidity sources such as PancakeSwap V3, V2, StableSwap and market makers on BNB Smart Chain and Ethereum.
Users can customize trades themselves by selecting liquidity sources and routing options. Smart Router finds the best prices in different pools, ensuring optimal trade execution.
Limit orders at desired pricesHaving a limit order feature on PancakeSwap allows you to have better control over your trades. Users can set desired prices to buy or sell tokens when the market reaches a certain limit price or better.
Integration with market makersPancakeSwap's integration with market makers on Ethereum and BNB Smart Chain improves trading efficiency. Trades are automatically routed to market makers with the best execution prices compared to AMM. This integration is designed to provide profitable trading opportunities and increased liquidity.
Zap functionTypically, users wishing to provide liquidity to DeFi platforms need to add a couple of tokens to the liquidity pool. On PancakeSwap, the Zap feature simplifies this process by allowing you to add or withdraw liquidity with one click and with just one token.
Users can add liquidity using unbalanced token pairs, and Zap will automatically restore the balance to 50/50. Zap also greatly simplifies the withdrawal of liquidity by crediting the user with only one token in a trading pair.
Connect to PancakeSwapWithout connecting a wallet, many functions on the PancakeSwap website may not be available. Click “Connect Wallet” and you will be presented with several options to choose from, including MetaMask, Trust Wallet, WalletConnect and Binance Chain Wallet.
For more information on connecting MetaMask to BSC, check out this guide: Connecting MetaMask to BNB Smart Chain.
If the connection is successful, your wallet ID should appear in the upper right corner.
Adding liquidityIf you have used AMM before, the process will be familiar to you. To farm CAKE, you must first deposit liquidity on the exchange.
1. Open the “Trade” tab, click “Liquidity” and “Add Liquidity”.
2. Select a pair of tokens to deposit (for example, BNB and CAKE). Be sure to do your research on non-permanent losses before adding liquidity to the pool.
3. The platform will automatically select the most suitable commission.
4. Установите ценовой диапазон для предоставления ликвидности. Вы не выйдете за указанные рамки, а потому меньший диапазон ликвидности, как правило, более безопасен.
5. Specify the deposit amount and click “Add Liquidity”.
6. Confirm several transactions in the wallet so that the platform can use your tokens and add liquidity to the pool.
More information on adding and removing liquidity can be found in the official PancakeSwap documentation.
Farming profitabilityLP tokens can also be staked to earn CAKE or other assets. Go to the Farming tab and select the option corresponding to your LP tokens.
You will need to approve the transaction in order for the contract to withdraw tokens on your behalf. When you click the Approve Contract button, a pop-up window will appear asking you to confirm the transaction and fee amount.
Then enter the amount to stake and confirm it. On this page you can track the amount of CAKE earned. To withdraw your reward, click “Harvest” and confirm the transaction.
The lotteryCAKE tokens can also be used to participate in the PancakeSwap lottery, which is managed by a smart contract.
Each lottery ticket costs about $5 at CAKE and produces a random six-digit number combination (for example, 9-1-3-9-6-2). To win the jackpot, the numbers on the ticket must exactly match the lottery numbers in the same order.
What if the numbers don't match exactly? Do not worry. You will still be able to receive a reward if at least one number (or more) matches the winning combination.
Sweepstakes prizes are based on the amount of CAKE used to purchase tickets. Unreceived CAKEs from previous rounds of the lottery will be added to them. In addition, PancakeSwap periodically allocates CAKE from its treasury.
Non-fungible tokens (NFTs)PancakeSwap also has an NFT marketplace where you can buy, sell, and collect unique assets on the BNB Smart Chain.
Game marketplacePancakeSwap, in partnership with third-party game developers, also offers the Web3 Game Marketplace, which is a game distribution platform. Thus, the game Pancake Protector from the Mobox team was published on it.
The platform is open to developers who want to release games on it. Projects are selected based on certain criteria, such as past achievements, connections to PancakeSwap elements, roadmap development, technical support, and community engagement.
Безопасность PancakeSwapThe PancakeSwap platform has been audited by CertiK and is one of the leading platforms in the DeFi field. Does this mean that it is completely safe? Not really. Depositing funds into a smart contract always involves risk, even in the case of proven and reliable projects. There is also a risk of financial loss in the process of trading or providing liquidity. Never deposit more money than you are willing to lose.
In conclusionEthereum may have started DeFi, but PancakeSwap is credited with spreading this innovation to other chains.
It has become an all-in-one community-driven platform and has strengthened its position as a key player in the decentralized finance market.
PancakeSwap brings convenience to DeFi users by offering AMM, liquidity pools, yield farming, market maker integrations, Zap, limit orders and other useful features.
Recommended readingWhat is yield farming in decentralized finance (DeFi)?
What are automated market makers (AMMs)
What are smart contracts?
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