What is PancakeSwap? A Uniswap-style DEX on Binance Smart Chain

What is PancakeSwap?

It is a non-custodial platform on Binance Smart Chain (BSC) for swaps and yield farming with BEP-20 tokens. The venue has its own token, CAKE, and is akin to Uniswap and SushiSwap. Unlike those Ethereum-based exchanges, PancakeSwap offers faster transactions and lower fees, because BSC is a far more centralised analogue of Ethereum.

To facilitate trading, the platform uses an automated market maker (AMM) model. This means PancakeSwap has no traditional order book. Instead, trading occurs within liquidity pools funded by users. In return they receive liquidity provider (LP) tokens, which entitle them to trading-fee income, farming and more.

Who created PancakeSwap, and when?

The platform was launched on September 20, 2020 by anonymous developers with support from Binance. In February 2021 PancakeSwap became one of the largest DeFi exchanges by trading volume, and in March it surpassed Uniswap in total value locked (TVL) — $4bn versus $3.73bn.

At the time of writing, PancakeSwap ranks among the top three decentralised exchanges:

By TVL, PancakeSwap is first within the BSC ecosystem and fifth among all DeFi platforms.

How to start using PancakeSwap?

To begin, connect a Web3 wallet. Go to the official site and click the Connect icon. A window will open to choose a wallet. Available options are MetaMask, TrustWallet, MathWallet, TokenPocket, WalletConnect, Binance Chain Wallet, SafePal Wallet and Coin98 Wallet.

After choosing a wallet, for example MetaMask, another window will open to confirm authorisation.

What can you do on PancakeSwap?

Exchange. You need BNB to buy and trade tokens. You can purchase BNB directly on PancakeSwap or on Binance and then transfer it to your wallet. Trading is under Trade in the Exchange tab. 

In version two of PancakeSwap there are more than 1,000 trading pairs. When swapping tokens, traders pay a 0.25% fee per trade, of which 0.03% goes to the treasury, 0.05% is burned, and 0.17% is distributed to liquidity providers.

Liquidity. In the same Trade section you can become a liquidity provider and receive LP tokens. Click Trade, then Liquidity and Add Liquidity. A window will appear to choose two assets to add to the relevant liquidity pool. Before doing so, it is worth learning what impermanent loss is to understand the risks.

Farms. You can stake LP tokens in farms to earn yield. Go to Farms and pick the farm matching your LP token in Liquidity. For example, for CAKE-BNB LP choose the CAKE-BNB farm. Farming then begins, paying rewards in CAKE. You can harvest at any time by clicking Harvest.

Pools. Here you can stake CAKE in “Syrup” pools and earn via staking. Rewards are paid in the pool’s currency: if you enter Earn SPS, you will receive SPS. You can claim at any time by paying the transaction fee.

Prediction. This is a new, beta feature. It lets you earn by predicting the BNB/USDT rate — essentially a five-minute binary option. These are very risky because short-term price moves are notoriously hard to forecast. Before betting, carefully read the rules and guide.

Lottery. The platform also runs a lottery every six hours. To take part, go to Lottery and buy a ticket for $5. You will receive a combination of six random numbers from 1 to 14, for example, “5-7-7-10-5-13”. To win, users must match:

• All six numbers to win or share 40% of the prize pool;
• The first five numbers to win or share 20% of the pool;
• The first four numbers to win or share 10% of the pool;
• The first three numbers to win or share 6% of the pool;
• The first two numbers to win or share 3% of the pool;
• The first number to win or share 1% of the pool;
• The remaining 20% is burned permanently.

Rules and conditions for the PancakeSwap lottery can be found in their FAQ.

Collectibles. This section gathers all non-fungible tokens (NFTs) issued on PancakeSwap. You can win them in raffles, then either trade them for CAKE or keep them in your collection. To enter an NFT draw, register in the relevant section.

Team Battle. Users can form teams and compete to win CAKE, NFTs and other prizes. Go to Teams & Profile, then Your Profile to create one. Set a nickname, choose an avatar and a team. Creating a profile costs 1.5 CAKE.

The contest revolves around trading designated pairs and earning achievements on the exchange. The team with the higher trading volume and more achievements wins. Current team rankings are shown in Leaderboards. They are calculated by the combined trading volume and achievements of the top 500 members of each team. Rewards are allocated according to each participant’s share of team trading.

IFO (Initial Farm Offerings). An IFO is a primary sale of a new project’s tokens followed by listing on PancakeSwap. It is akin to an IEO (Initial Exchange Offering), but on a decentralised platform. They are also called IDOs (Initial DEX Offerings). To buy new tokens you need a PancakeSwap profile and CAKE-BNB LP. Learn more about IFOs on PancakeSwap’s site.

How safe is PancakeSwap?

The exchange has passed a CertiK audit and integrates with its security tools: Security Oracle, CertiKShield DeepSEA and The CertiK Virtual Machine. CertiK’s audit results are available on this page. The platform also underwent a Slowmist security audit.

These checks suggest the service is not a scam and has no obvious vulnerabilities, but they do not guarantee safety, as shown by the hacks of the DeFi protocol and the lottery on PancakeSwap that occurred after the CertiK audit. Exercise caution when using any DeFi application, including PancakeSwap.