Today we are going to talk about an old project. Why haven’t we talked about it before? Because we have talked about uni, curve, curve war, convex, etc. Why haven’t we talked about cake? First, this is a copy of UNI and there is nothing eye-catching to talk about. Second, you can actually understand it as uni on the BSC chain, and its previous transaction volume was lower than that of CRV and UNI, so we didn’t talk about this project.

But why do we bring it up again now? First, we see that it has doubled recently. Second, it has entered the top 100 market capitalization, and its current market capitalization has reached 600 million US dollars. Third, it has had some updates recently, and its characteristics have changed. Let us interpret it together.

Introduction

PancakeSwap is a decentralized trading platform built on the Binance Smart Chain (BSC), allowing users to trade through an automated market maker (AMM) model. PancakeSwap was created to solve the expensive transaction fees and congestion problems on the Ethereum network. By using the Binance Smart Chain, PancakeSwap is able to provide faster and cheaper transaction services. But currently it already supports many chains, including BSC, ETH, Polygon, zks, arb, linea, base, opBNB, Aptos, etc.

PancakeSwap Background

PancakeSwap was born out of the success of Uniswap. Uniswap is the largest decentralized exchange in the Ethereum ecosystem, using an innovative automated market maker model. However, with the congestion of the Ethereum network and the rise in transaction fees, many users and projects began to look for alternatives. Binance Smart Chain, as a high-performance, low-cost blockchain platform, became an ideal choice. PancakeSwap was born in this context.

Current Products

In terms of product functions, it has undergone many iterations and has derived not only AMM, but also liquidity staking, yield farms, including Cake staking, liquid steaking, simple staking (that is, staking of several tokens for a fixed period of time), etc.; it has also launched Games, and currently has 2 games. Of course, there will definitely be NFTs in games, and there is currently an NFT trading market. There is also IFO (Initial Farm Offering), which is similar to IEO, but the difference is that users participating in IFO need to pay the LP Token of the CAKE/BNB trading pair.

Current data

The official website currently shows that the total number of users is 1.3 million (monthly active users), and the TVL is currently 1.4 billion US dollars. This data is very good, because we have analyzed uni before, and the ratio of uni’s market value to TVL is about 1:1, while pancake is about 1:2.

But what is the most core data of an exchange? It must be the trading volume. We can see from the data on dune that Pancake is still ranked second with a total trading volume of 2.9 billion in 7 days, which is still a certain gap from the first place UNI of 11 billion, and twice the data of the third place Curve, accounting for 14.8% of the entire DEX. Although UNI’s trading volume is about 4 times that of Pancake, UNI’s current market value is 3.6 billion US dollars, while Pancake’s market value is only 600 million US dollars, a difference of 6 times.

Token Economy

The project was launched on 2020-09-18, with a total supply of 750,000,000, of which 270,909,762 are currently in circulation, and the current total supply is 395,627,520. 1,081,320,660 have been brun, and the current emission reward per block is 1.36.

Similar to other AMM exchanges, the transaction fee is 0.25%, of which 0.17% is distributed to LP token holders, 0.03% is placed in the treasury, and 0.05% of CAKE will be repurchased and burned.

The current price of the currency is US$2.35, and the peak was $44.0791 (2021-04-30), so it has also fallen by more than 90%.

Important Update 2023-11-22

We are excited to launch two transformative features: Gauges voting and veCAKE, which revolutionize the CAKE emission governance system. This strategic update aims to enhance the governance influence of CAKE holders, improve the liquidity of the entire liquidity pool, and provide more rewards for CAKE lockers.

Introducing the Gauges voting system

The new Gauges voting system enables veCAKE holders to influence the distribution of CAKE emissions across base products like farms on the BNB chain, Ethereum, and Arbitrum. As a veCAKE holder, you can directly influence the distribution of CAKE emissions across each pool - rewarding specific liquidity pools and projects that work in your favor. The more veCAKE accumulated through Gauges voting, the more CAKE emissions are allocated. As a result, liquidity providers (LPs) will be able to earn more CAKE through liquidity mining over the (next) 14 days.

After this update, Pancake has changed from "uni" to "curve". When we talked about curve before, we talked about the curve war. There was a lot of competition around vecurve. In the end, Convex won. Convex holds more than 50% of curve. So currently Convex has the final say on curve emission.

You can watch our previous episode where we talked about convex. Of course, the convex war and other things happened afterwards, but we won’t talk about that.

So what happens when the pancake becomes a curve?

First of all, we need to know why Curve can’t rise? We can see that Curve has been very stable since it fell, no matter it is a bull market or a bear market, why? Logically, when we talked about Curve before, Curve was one of the DeFi duo like UNI. Then we also compared the differences between Uni and Curve. Uni has no ecosystem, while Curve has a prosperous ecosystem. Curve has evolved many applications, so why can’t it rise?

Let's analyze it from the source. First of all, Curve is completely governed by DAO. That is, whoever has more "stocks" of CRV has more voting rights. The greater the voting rights, the stronger your voice. If you have more than 50% of the stocks, then you are the boss and you have the final say. What will you do at this time?

Then I will definitely lean towards my own interests. I want to have control all the time, after all, it is linked to interests, so I will propose that first, dividends should be distributed according to shares. Since I am the boss, I will definitely get more. The more shares I have, the less I will lose control. Second, if I want to maximize economic benefits, the more I get, the more I can sell, and the more I sell, the more I can earn. This will form a spiral, and constantly form positive feedback. Therefore, the emission of CRV is very serious every year, and the price of the currency will certainly not go up. In the same way, the pancake is also turning into a curve, so there will inevitably be a war without gunpowder.

Can cake still be bought? If you understand the above principle, you will know it clearly and there is no need to say more. But we can check who is buying cake, or who is the largest holder of cake at present. Maybe we can find some new opportunities?