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How to Make Passive Income on PancakeSwap

Posted by
Ian Kane

It’s never been easier to get your money working for you

Anybody can make passive income on PancakeSwap, but there are some things everybody needs to know. What is PancakeSwap? How does it work and what are the risks involved? It’s important to minimize those risks, even though high risks also come with big rewards (or losses). 

PancakeSwap is a decentralized finance application running on Binance Smart Chain. Looking past the creative name, PancakeSwap is fundamentally Ethereum’s SushiSwap running on the Binance Smart Chain with the bonus of quicker and cheaper transactions for users. 

The core function of PancakeSwap is as an exchange platform. Most people use PancakeSwap to exchange or swap the native Binance Coin (BNB) and other cryptocurrencies. To make this possible, the platform needs liquidity. Simply put, the tokens need to be available and to be provided by people. This is where the user comes in. Anybody visiting PancakeSwap can become a liquidity provider by buying a share of these tokens and then allowing PancakeSwap to exchange them. For each liquidity pool, you provide some tokens and an equal amount of value in CAKE tokens. For performing this action, you get rewarded with more CAKE. In simple terms — the CAKE token is a reward for providing liquidity to the platform. In the same way, a bank needs capital to operate. 

The more people who want to exchange tokens on PancakeSwap, the more transactions take place and thus the higher the pay for liquidity providers. The more people who want to provide liquidity, the higher the supply, and unfortunately the lower the reward. Your provided liquidity, or money, gets moved around several hundred times a day, each time earning you a share of transaction fees.

Moreover, the safest way to make a sustained passive income on PancakeSwap is to simply stake CAKE and let it compound. With PancakeSwap attracting over 1 million unique active wallets on a weekly basis there has never been a better time to start earning a passive income with the leading DeFi dapp on Binance Smart Chain. 

Staking CAKE on PancakeSwap for passive income

Making a passive income on PancakeSwap can be easily done by staking CAKE. First, you will need some BNB to buy some CAKE. As PancakeSwap’s CAKE token is a Binance Smart Chain (BSC) token or BEP-20, you’ll need a Binance account to acquire and potentially sell BNB and CAKE for USD or EUR. This is the easiest way.

Firstly, you will need to register an exchange account with Binance and complete the verification process. Once set up, use the Search Coin function and look for BNB. Note, it’s possible to buy BNB directly by credit card when you click buy in the right-hand side Action tab. After you’ve purchased and received BNB you’ll need to set up your browser wallet.

  • We would advise you to use a Metamask blockchain wallet. 
  • Once you have that setup, add Binance Smart Chain as one of the networks in Metamask, following the steps in the video below. 
  • Once the wallet has been set up, you will need to transfer the BNB you purchased using the Binance wallet in the previous step. 

Now, you have set up your Metamask wallet, you are able to receive the BNB you purchased in Binance in order to start interacting with PancakeSwap. To do this, in your Binance wallet copy your Metamask wallet address into the withdraw crypto or withdraw BNB menu as the target.

Copy your wallet address from Metamask 
Paste it into the Binance wallet

Make sure to double-check the wallet addresses used and ensure everything is correct before proceeding. After doing those steps the BNB should arrive in your MetaMask wallet within the next 30 minutes.

How to get CAKE 

Head to the DappRadar token swap page. Make sure your Metamask is set to the Binance Smart Chain network. 

Now you will use the BNB you just sent to your Metamask wallet from Binance in the previous step. We want to trade BNB for CAKE. Remember not to trade it all and keep some BNB as it’s needed to cover any and all transaction fees. Around $10 should be more than enough to cover what we will do in this tutorial. 

Enter the amount of BNB you wish to exchange to CAKE and click swap. A small fee will apply but within seconds you should have CAKE back in your Metamask wallet. If the token has not added itself in Metamask you can do that by clicking on ‘Add Tokens’ and use the PancakeSwap contract address to quickly add it. After swapping the BNB for CAKE, you’re ready to start staking and earning. In your Metamask wallet, you will now see both BNB and CAKE. 

CAKE Token Address – 0x0e09fabb73bd3ade0a17ecc321fd13a19e81ce82

Stake CAKE in Pools

Pools are the most straightforward option for those looking to dip a toe into DeFi. You simply stake CAKE and get rewarded with more CAKE. There are two pools: the Manual CAKE pool and the Auto CAKE pool. We advise the Auto CAKE pool. Mainly because the manual pool does not automatically compound the staked CAKE and simply allows you to collect it after a while and then manually re-stake or sell it. Basically, compounding the CAKE to earn interest on your interest has to be done manually. Contrary to this, the Auto pool automatically compounds the invested CAKE and adds it to the stake for a 2% performance fee. Taking away the need for repeat visits and hassle. 

Click the Pools tab on the left side of the PancakeSwap website. You are now presented with several options with varying percentage rewards. 

In nutshell, ​​these two pools will generate CAKE indefinitely for varying amounts of APY between about 60–100% per year. The more CAKE is staked over time, the lower the yield will be. Of course, eventually, it will decrease massively. For now, those high percentages are still available. 

Additionally, there are other pools available to enable you to stake CAKE and return other tokens. However, these pools are not infinite and also have no auto compounding features. Unless you think you found the next BTC on the list we advise you to stick to staking and harvesting CAKE for now. 

Stake CAKE in Farms

For more risk-tolerant investors farms offer higher rewards. Of course, this comes with a higher associated risk. For this activity, you need to first get Liquidity Tokens (LP tokens). These liquidity tokens can be acquired directly in PancakeSwap by selecting the Trade tab on the left and clicking Liquidity.

Putting BNB and CAKE in the CAKE-BNB pair gives an APR of about 38% and results in you now holding CAKE-BNB LP. These LP tokens can be staked by selecting the Farms tab on the left, searching for the pair, and selecting the Stake LP option.

There’s a big selection of different pairs for different coins. Typically, the newer the pair, the less liquidity is provided and the higher the rewards. Like other high reward options, these do not compound automatically, and all reward the CAKE token. Which can then be re-staked via the Pools option described.

The Risks 

Binance Smart Chain and PancakeSwap have become mainstays in the growing DeFi industry. Moreover, staking and providing liquidity has become a new way to earn for those with an understanding of what’s on offer. The real issues with why people perhaps are not rushing to this new service are trust and understanding. Trust that their savings are safe and an understanding of what staking actually is and entails. These guides are intended as an introduction to the possibilities of DeFi and the dapps that power them.

The above does not constitute investment advice. The information given here is purely for informational purposes only. Please exercise due diligence and do your research. The writer holds positions in ETH, BTC, ADA, MATIC, SAFEMOON, HEX, LINK, GRT, CRO, OMI, USDT, SOL, SHIBA INU, AVASTR, RAY, BOSON, AND OCEAN.

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