The rise of decentralized finance (DeFi) has brought us exciting new ways to manage money that are faster, more inclusive, and independent from traditional banks.
One standout in this space is PancakeSwap, a decentralized exchange (DEX) on the BNB Chain (formerly Binance Smart Chain). It’s similar to other popular DEXs like Uniswap and SushiSwap but with its own unique twists.
In this blog post, we’ll break down how PancakeSwap works and show you how to start taking advantage of its features.
What is PancakeSwap?
PancakeSwap is a decentralized exchange (DEX) built on the BNB Chain. This means, like Uniswap, it allows users to trade their coins directly with each other without needing a middleman. One of PancakeSwap’s big advantages is its lower trading fees compared to many other exchanges. Plus, you can earn interest on your crypto by staking or lending your assets.
PancakeSwap specializes in BEP20 tokens, a token standard created by Binance.
| 👍Pros | 👎Cons |
| Lower transaction costs thanks to being built on BNB Chain | No mobile app available |
| Supports staking | Doesn’t have its own native crypto wallet |
| Easy-to-use interface | Limited to trading BEP-20 tokens.
It means no trading BTC and other non-BEP-20 tokens. |
| Active developer community and a solid roadmap | No customer support |
PancakeSwap features and benefits
PancakeSwap is ideal for users who prefer trading without intermediaries and want to maintain control over their tokens. It’s also perfect for those who don’t want to share personal information, as required by centralized exchanges.
If you’re looking to trade with lower fees, PancakeSwap is a great choice. It charges a flat commission of just 0.25% on every trade, which is much lower than many other exchanges.
For users interested in earning interest on their crypto assets, PancakeSwap offers staking and lending options. You can add tokens to liquidity pools to earn rewards or lend tokens to other users and earn interest on your loans.
Let’s take a closer look at PancakeSwap’s key features.
Spot Trading
Spot trading on PancakeSwap happens through swapping assets in a liquidity pool using an automated market maker (AMM). This means trades are made live, with prices set by the ratio of assets in the pool. You don’t get to choose the exact price you buy or sell at.
You can easily swap BEP-20 tokens like ETH, BNB, and CAKE.
Important note: you’ll need to connect a wallet that holds the tokens you want to trade because PancakeSwap doesn’t support fiat currency.
PancakeSwap Lottery
PancakeSwap often runs lottery programs where you can win large amounts of CAKE tokens. You buy lottery tickets using CAKE tokens, and each ticket costs about $5 worth of CAKE.
You can pick a ticket number yourself or get a random one. If you’re lucky, you could win CAKE tokens worth hundreds of thousands of dollars.
Important note: Keep in mind that the lottery, like the Prediction game, is a form of gambling, and you can lose your money quickly.
Yield Farming on PancakeSwap
Farming is another way to earn income on PancakeSwap, allowing you to farm for CAKE tokens.
Yield farming lets you earn interest on your crypto assets by depositing them into liquidity pools. These assets are staked to earn rewards, which are shared among all contributors. Pools can also lend out their assets and share the interest earned.
PancakeSwap offers various pools, or “farms,” with interest rates over 10%. One example is the “Syrup” pool, where you can stake CAKE tokens. You can lock up your tokens for a fixed period or choose a flexible option where you can withdraw your assets anytime.
Here’s how to start farming on PancakeSwap
- On the PancakeSwap homepage, click the “Earn” menu and select the “Farms” option.
- Browse the list of farms and choose one that matches the LP tokens you have. Consider the annual percentage rate (APR) offered.
- Once you’ve chosen a farm, click “Enable” and confirm the action in your wallet. The “Enable” button will change to “Stake LP.”
- Click “Stake LP” and enter the number of LP tokens you want to stake.
- Click “Confirm,” and your wallet will ask you to confirm the transaction. After this, you’ll see your staked LP balance in the farm.
- To withdraw your earnings and staked LP tokens, click “Harvest.”
Staking on PancakeSwap
You can boost your farming earnings by staking your CAKE tokens in PancakeSwap’s Syrup pools. Just go to the “Pools” section in the “Earn” dropdown menu. There, you’ll see the available pools, their annual percentage yields (APY), and the total staked amount.
Here’s how to do it:
- Choose a pool.
- Activate CAKE staking in your wallet by clicking “Enable.”
- Enter the amount of CAKE you want to stake and click “Confirm.”
- Depending on the pool, your earnings might be automatically harvested and restaked.
Let’s break it down with an example on the BNB Chain:
- Deposit ALPHA and BNB into the ALPHA/BNB liquidity pool to get LP tokens.
- Use those LP tokens in the appropriate farm to earn CAKE tokens.
- Stake your CAKE tokens in a Syrup pool for extra interest.
Important note: Be aware that flexible staking offers fewer rewards than fixed staking.
Prediction
PancakeSwap has a prediction market where you can bet on the price movements of token pairs like BNB and CAKE.
You predict whether the price will go up or down at a certain time in the future by adding tokens to the prize pool. If your prediction is correct, you can earn rewards that are several times what you contributed to the prize pool.
PancakeSwap fees
| Transaction | Fee |
| Spot Trading | 0.25% |
| Futures Trading | 0.02% for makers and 0.07% for takers |
| Withdrawal | None |
Security
PancakeSwap is known for its security. Being a non-custodial DEX, it never holds your assets directly in large hot wallets, making it more secure than centralized exchanges.
Here are some key security features of PancakeSwap:
- SSL encryption: This encrypts data transferred between your web browser and PancakeSwap’s servers, preventing hackers from intercepting your information.
- Bug bounty: PancakeSwap offers rewards to users who find and report security flaws.
- Transparency: Built on open-source software, all the website code and Smart Contracts are publicly visible and verified on blockchain explorers, so everything is transparent.
- Audits: PancakeSwap has been audited by security firms like Slowmist and Certik, ensuring its security measures are robust.
Customer service
Sadly, PancakeSwap doesn’t have a dedicated support service, which can be a bit frustrating. If you run into a problem that isn’t covered in their FAQ, you’ll need to seek help on PancakeSwap’s Telegram channel. For technical issues, you can check the troubleshooting page for your error code.
Closing thoughts
Once you see all the features and benefits of using PancakeSwap, it’s clear why it’s so popular.
PancakeSwap is one of the largest decentralized exchanges in the world, with nearly $4 billion in user funds. It makes trading tokens on the Binance Smart Chain easy. If you have an existing crypto wallet, signing up is a breeze. After that, you can swap tokens, stake or lend them to earn interest, and even join lottery and prediction markets to win CAKE tokens.
The platform is very inclusive and works with most ERC-20 projects. With the rising costs and congestion on Ethereum, it makes sense that PancakeSwap is seeing more and more users.
Interested in learning about other crypto exchanges? Check out our other reviews:
