What Is PancakeSwap?

Recently, DeFi investors have found a new favorite — PancakeSwap. Its popularity is now on par with conventional DEX assets like Uniswap and SushiSwap. This elusive token of Binance Smart Chain is making headlines, but does it deserve its fame, and why?

What Is PancakeSwap App?

PancakeSwap, a decentralized exchange on Binance Smart Chain, is a strong competitor to Ethereum and Uniswap. Its key advantages are speed and low cost of transactions. Since its launch in September 2020, PancakeSwap has grown into one of the biggest DeFi systems with over 3.7 million users. The potential of this DEX is so strong that it may soon eclipse its creator!

So, what is PancakeSwap exactly? In this guide, we will explain the fundamentals of decentralized exchange, liquidity protocol, and the benefits for investors. While this DEX is essentially a Uniswap clone, the two have quite a few differences. The BSC-based system is more than yet another food-themed protocol and buzzword.

How to Use PancakeSwap?

As an AMM (Automated Market Maker) protocol, PancakeSwap provides the basis of liquidity exchange. This means:

  • There is no centralized order book.
  • Users generate liquidity pools to swap between crypto assets.
  • Anyone can create a pair, add liquidity, and open up a new market.
  • Whenever you exchange crypto, you are tapping into user-generated AMM liquidity pools.

The PancakeSwap DEX only supports trading of BEP-20 tokens, as it is built on Binance Smart Chain, not Ethereum. However, holders of ERC-20 tokens are also in luck — they can wrap their assets via the Binance Bridge. Compared to Binance or Coinbase, swaps are easier, faster and more flexible.

Those who stake the native BEP-20 token CAKE get SYRUP rewards, which entitle them to a share of CAKE emissions. The protocol is most attractive to investors with relatively limited funds — i.e., those who cannot splurge on gas fees.

Generation of liquidity pools is based on DeFi LP (liquidity provider) opportunities. Providers are flocking to the new system. Since launch, PancakeSwap has accumulated over $1 billion in migrated total value locked (TVL).

PancakeSwap vs. Uniswap vs. SushiSwap

How does this system stack up against other major decentralized exchanges? All three enable community governance, yield farming, and LP opportunities. However, Uniswap does not pay staking rewards to token holders.

  • Uniswap is the original DeFi liquidity protocol with the ERC-20 UNI token. It is based on Ethereum and used only for governance. The system mainly relies on ETH pairs.
  • SushiSwap is a Uniswap fork turned DeFi hub. It is community-governed and offers token swaps, farming, and crypto loans. The native token SUSHI is combined with a revenue-sharing token xSUSHI.
  • PancakeSwap is a Uniswap clone based on BSC. Its purpose is to support quick and low-cost trades via BEP-20 tokens (CAKE) and the BSC←→ETH bridge. The revenue-sharing token is called SYRUP.

Comparison of Revenue Sharing Tokens

Users who stake the PancakeSwap coin CAKE are rewarded with SYRUP at a 1:1 ratio. The token entitles them to transaction fees from the protocol — a quarter of CAKE emissions. The fees are shared proportionately. This system is similar to SushiSwap, where token holders get xSUSHI.

In Uniswap, UNI does not allow wealth creation. Its only purpose is governance. This explains why so many liquidity providers have abandoned this DeFi protocol.

Farming LP Tokens

This process has the same logic as yield farming on SushiSwap. It requires finding a pair of assets (those you hold or want to supply), running a wallet, depositing, and farming.

However, the cost of depositing is lower, which is the key advantage for users. Binance Smart Chain is cheaper to use than Ethereum as BSC is more centralized. This translates into impressive scaling prowess.

The DEX is also faster thanks to higher throughput. In terms of speed and cost, PancakeSwap is superior to both Uniswap and Sushi.

Gamification of User Experience

Both Uniswap and Sushiswap have playful logos despite their serious DeFi nature. PancakeSwap ramps up the fun — aside from an amusing name and graphics, it has a daily lottery. Users deposit CAKE tokens to participate and wait for the results.

The more tokens they deposit, the better the odds of winning and the higher the stakes. This is a simple but brilliant system, and it is wildly popular. The promotional graphics are adorable!

Getting Started on PancakeSwap

Beginners should first link their wallets to Binance Smart Chain. Follow the instructions below before delving into trading and wealth generation. As of now, this exchange can link to 7 systems:

  • Metamask
  • TrustWallet
  • MathWallet
  • TokenPocket
  • WalletConnect
  • Binance Chain Wallet
  • SafePal Wallet

How To Connect Trust Wallet To PancakeSwap

You can connect your wallet using a smartphone or a combination of PC and tablet. Follow the steps below for desktop browsers:

  • Open pancakeswap.finance in your browser.
  • Tap Connect.
  • Select Wallet Connect from the list to see a QR code.
  • Launch the wallet app on your mobile device.
  • In the settings, tap Wallet Connect.
  • Scan the QR code.
  • Wait for notification PancakeSwap wants to connect to your wallet.
  • Connect the wallet.

The latest iOS version of the wallet does not feature the DApp browser. However, you can still connect your Trust Wallet to the DEX in a couple of minutes using linking via mobile browser.

How to Connect MetaMask Wallet

Take the following steps in your desktop browser.

  1. Go to pancakeswap.finance.
  2. Click Connect in the upper right corner
  3. Choose your wallet from the list. A connection window will pop up.
  4. Check the box next to the name of your wallet.
  5. Click Next.
  6. Allow the system to view the addresses of your permitted accounts.

Click Connect.

How Does PancakeSwap Work for Swapping?

Trading on the DEX is relatively straightforward. Currently, the PancakeSwap Safemoon BNB pair has the most liquidity. Follow the steps below:

  1. Visit pancakeSwap.finance.
  2. Choose Trade from the menu.
  3. Click Exchange and toggle the tool at the center of your screen to the Swap option.
  4. Select the cryptocurrencies for swapping from the drop-down menus in each line.
  5. Click the Swap button.
  6. Confirm the transaction in your wallet.

How Does PancakeSwap Work for Swapping?

Trading on the DEX is relatively straightforward. Currently, the PancakeSwap Safemoon BNB pair has the most liquidity. Follow the steps below:

  1. Visit pancakeSwap.finance.
  2. Choose Trade from the menu.
  3. Click Exchange and toggle the tool at the center of your screen to the Swap option.
  4. Select the cryptocurrencies for swapping from the drop-down menus in each line.
  5. Click the Swap button.
  6. Confirm the transaction in your wallet.

How to Use Binance Bridge

You can convert your ERC-20 tokens into the Binance Smart Chain token standard (BEP-20) quite easily. This requires just a few simple steps:

  1. Open the Binance Bridge.
  2. Connect your wallet.
  3. Input the token to be bridged.
  4. Confirm the transaction on Ethereum (when connecting from a Metamask wallet on the core Ethereum network).

After finishing your operations on PancakeSwap, convert your assets back from BEP-20 to ERC-20. This will require taking the same steps on Binance Bridge in reverse order.

Every transaction will cost a particular amount of ETH. Although the initial expense may be significant, take a long view. PancakeSwap will help you save a lot in trading fees once your assets have been wrapped and bridged over to BSC.

Wrapping of assets from other chains is not the only function of Binance Bridge. It also lets you bridge ETH for liquidity provision and yield farming on PancakeSwap.

How Does PancakeSwap Work for Liquidity Providers?

Users providing liquidity reap rewards, just like on Uniswap or SushiSwap. This makes this AMM liquid for exchange. Joining the provider pool is easy:

  1. Click Liquidity.
  2. Click Add liquidity.
  3. Specify two tokens you are providing liquidity for (your wallet must be unlocked).
  4. Deposit the said pair by confirming the transaction.

The system will reward you with an LP token called FLIP — a representation of your stake in the pool. FLIP holders receive a portion of rewards every time an exchange transaction taps into their pool’s liquidity. To claim these rewards, they redeem their FLIP tokens. This unlocks the underlying assets, which have appreciated by that point.

Things to Remember

  • On PancakeSwap, liquidity may only be provided in pairs, which means you must choose two tokens.
  • You can add liquidity to an existing pool or create a new one. The latter option is typically chosen by projects seeking to debut their own token on PancakeSwap.

How Does PancakeSwap Work for Yield Farming?

Providing liquidity and yield farming are two different things. Liquidity providers contribute pairs of assets to a pool for exchange transactions, and the value of these assets rises over time. Yield farming requires that you deposit one type of assets to have other tokens issued.

  1. Open the Farms tab on PancakeSwap.
  2. Switch the toggle to Live farms to see what is currently happening.
  3. Choose the farms from the list (it is lengthy and includes many farms with BNB and BUSD base pairs).
  4. Click Details on any farm to see how much CAKE it accumulates.
  5. Unlock your wallet so PancakeSwap can automatically detect the available currencies.
  6. Deposit your assets in the farm.

As soon as your tokens are deposited, you will see how much CAKE you have earned. As of now, the farming yield is high across several pairs. Some farms, including DUSK-BNB, earn upwards of 200% APY.

How to Use Syrup Pools

As we have mentioned, holders of CAKE tokens are entitled to staking rewards. The Syrup pool is where they deposit CAKE to get the BEP-20 token.

The benefit for the user is getting a new token that may rise in value over time. The benefit for PancakeSwap is getting additional liquidity and a new instant listing on the exchange. Here is how to connect to your first Syrup Pool:

  1. Click Pools.
  2. Select the pool you like.
  3. Deposit your CAKE.

Research available pools to find the most appealing opportunity. Once your CAKE has been deposited, you will get new tokens.

Typical Errors and Solutions

Sometimes, users encounter errors when connecting their wallets or swapping assets. Many of them have appeared since migration from V1 to V2 — an upgrade that came out in April 2021. The change brought new DeFi contract features, but it was not perfectly smooth. Here are 6 common errors and proven fixes.

  1. Users swapping tokens may see the insufficient output amount PancakeSwap error. This means the liquidity or slippage tolerance is too low. This term denotes the minimum amount you agree to take regardless of price fluctuations. Increase the tolerance by 1% percent until the error disappears. You may also get this message if you try to swap scam tokens.
  2. The price impact too high PancakeSwap message when swapping means you will lose a significant share of your funds. Try switching back to the V1 version, as some tokens are still locked in its liquidity pool. If you are using V1, switch to PancakeSwap v2. If this does not work, try reducing the number of purchases and breaking down your transactions. Adjusting the price slippage may also solve the problem.
  3. Insufficient liquidity for this trade PancakeSwap is another problem caused by migration to V2. Change slippage tolerance to 12% via the exchange settings.
  4. When buying or selling a token, you may be notified that the system cannot estimate gas PancakeSwap. This typically happens with tokens like Bonfire and Safemoon. For legit tokens, the error indicates failure to estimate the transaction fee due to too many decimal places in the number. Raise a slipped tolerance to 12% and change the number of tokens.
  5. When connecting your wallet, you may see an error message about unsupported chain id PancakeSwap. This means that the token you want to swap is not supported by the DEX. You cannot fix this problem if there is no BNB in your wallet. After depositing, the solution is simple: switch your chain to BSC, but do not use a browser.
  6. If you are connecting to Trust Wallet in a browser instead of the DApp browser, you may get the message PancakeSwap no provider was found. Enable DApp on Trust Wallet.

How to Play the Lottery

Due to wild market volatility, trading crypto often feels like gambling. PancakeSwap gives you an additional opportunity to make a tidy profit — a real lottery! The only condition for participation is depositing CAKE tokens.

Click Lottery and purchase as many tickets as you like for CAKE tokens. The more you spend, the better your odds of winning. To win a share of the CAKE pot, you need two or more matching numbers.

PancakeSwap Lottery includes several sessions per day — you can win every 6 hours! This ensures significant turnover, while your chances of winning remain the same.

Initial farm offering (IFO)

IFO is a novel ICO model spearheaded by PancakeSwap. It allows providers of CAKE-BNB liquidity to purchase tokens of a new project. All they need to do is deposit their LP tokens on the corresponding IFO page.

Users who do not have any CAKE-BNB LP tokens yet must obtain them first:

  1. Purchase BNB and CAKE tokens depending on how much you want to contribute: divide the total amount in half between BNB and CAKE.
  2. Deposit the tokens in the liquidity pool to collect the reward LP tokens.
  3. Return to the IFO page.
  4. Deposit the LP tokens you received.

The project’s tokens will be provided after the IFO is finished.

Is PancakeSwap Safe?

This exchange has been operating without complaints or red flags since September 2020. It has been audited by CertiK, one of the most trusted blockchain security technology companies. The code is secure.

So, is PancakeSwap legit? Definitely. However, some assets traded on it may be shady. Before obtaining a new token, check its recent transactions.

Is PancakeSwap Better Than Uniswap?

Now you know how to get PancakeSwap account and unlock its full potential. But is this DEX superior to Uniswap, SushiSwap, and other rival exchanges? It depends.

Despite similar liquidity to Uniswap, PancakeSwap is significantly faster and cheaper from a user’s perspective. On the downside, the experience for holders of BEP-20 and ERC-20 tokens differs. Unless you hold BEP-20 tokens and want to stay on Binance Smart Chain, you have to convert your assets.

Using the Binance Bridge, which comes in and out of Ethereum, is not cheap. This protocol is not entirely decentralized, so BSC is not purely DeFi. However, PancakeSwap is going from strength to strength, and users should have no problem keeping their assets on the platform.