The Binance Smart Chain answer to SushiSwap
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.
As one of the earliest blockchains supporting smart contracts, the bulk of DeFi activity has been focused on the Ethereum blockchain. Its huge community of users and developers has proven to be an excellent starting point to create powerful decentralized applications (dapps).
However, surges in interest towards the back end of 2020 and the start of 2021 mean that the spotlight has been shifting away from Ethereum applications. Essentially Ethereum has become a victim of its own success in the DeFi space, as gas prices have risen to all-time highs, and as a result, forcing users to look elsewhere for better value transactions. Binance Smart Chain and DeFi dapps in their ecosystem are reaping the rewards.
At this point, it is essential to understand that a blockchain wallet is required to interact with Binance Smart Chain and PancakeSwap. Furthermore, any users familiar with the layout and design of Sushiswap will instantly feel at home on PancakeSwap.
- Get either the Binance Smart Chain wallet or use Metamask.
- 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, users can trade on PancakeSwap.
- Users need to provide liquidity to earn rewards, while PancakeSwap also allows users to easily swap one BEP-20 token for another. More about these options below.
PancakeSwap is a decentralized exchange for swapping BEP-20 tokens similar to Uniswap or SushiSwap and uses an automated market maker (AMM) model. Simply put, that means that users can trade digital assets on the platform. Importantly, there isn’t an order book and Instead, users trade against a liquidity pool.
Those pools are filled with other users’ funds. They deposit them into the pool, receiving liquidity provider tokens in return. They can use those tokens to reclaim their share, plus a portion of the trading fees. In short, you can trade BEP-20 tokens, or add liquidity and earn rewards.
Farming & Staking on PancakeSwap
A significant trend in 2020 and continuing is yield farming and PancakeSwap also allows you to farm its governance token – CAKE. Users can deposit liquidity provision (LP) tokens, locking them up in a process that rewards users with CAKE. The list of LP tokens accepted is long but a few major ones are:
- CAKE – BNB LP
- BUSD – BNB LP
- BETH – ETH LP
- USDT – BUSD LP
- USDC – BUSD LP
- DAI – BUSD LP
- LINK – BUSD LP
- TWT – BNB LP
Users can also earn by staking their CAKE in SYRUP pools after they have deposited funds to receive LP tokens and used them to farm CAKE. From there, users can stake CAKE and earn other tokens through special staking pools.
Further specific details about both farming and staking activities can be found here. The biggest SYRUP pool is for CAKE, where you can stake your CAKE to earn even more CAKE, but there are several other tokens you can earn by staking CAKE as well.
Learn more about Binance Smart Chain and its DeFi applications: