11 months following its launch, PancakeSwap has become one of the DeFi’s largest yield farming protocols. According to the DeFi Llama portal, it has already beaten Uniswap in terms of total value locked with $5.5B of accumulated funds.
How did PancakeSwap manage that? How can you generate income with CAKE token and Syrup pools? Let’s find out!
What is DeFi and why is everyone talking about it?
You know well how traditional finance looks like: banks with their cumbersome procedures, credit history, and low APR. If you want to borrow money, you have to undergo a credit check which you never know the result of in advance; if you want to make a deposit, the best you can count on is an interest rate slightly higher than the inflation.
Decentralized finance offers the same services but with cryptocurrency. Since it’s based on a permissionless blockchain, everyone with an internet connection can access it without any restrictions. The services in DeFi are transparent and intermediary-free, meaning that no one can affect your funds in any way beyond what’s written in a smart contract.
DeFi skyrocketed in 2020–2021 after the concept of yield farming was introduced: an opportunity to get extra tokens as a reward for providing liquidity to a protocol. PancakeSwap is one of such services — its simplicity and high profitability attracted millions of users in less than a year.
What is PancakeSwap? How does it work?
Pancake is a decentralized exchange (DEX) built on Binance Smart Chain — a blockchain launched by the Binance exchange in September 2020. As a DEX, PancakeSwap allows users to swap between BSC-based tokens right from their wallets at low fees.
PancakeSwap leverages the Automated Market Maker model: in this exchange, there is no order book where all “buy” and “sell” orders are written. Instead, there are liquidity pools — smart contacts where a pair of tokens is locked. For example, if a user wants to sell their BUSD and buy some CAKE tokens (native asset of PancakeSwap), they would trade directly with a BUSD-CAKE liquidity pool.
And here’s where the magic starts: these liquidity pools offer users numerous opportunities to profit. First, you can provide liquidity to a pool and get a share from every exchange in it as a reward. Second, when you provide liquidity to a pool, you get LP (liquidity pool) tokens that represent your share in the pool — and you can stake these tokens in farms and earn CAKE (this is exactly the yield farming part of the game). Third, you can stake the earned CAKE in single-currency Syrup pools and get even more CAKE or other BSC-based tokens.
We will review the earning process in PancakeSwap in more detail a little bit later.
What is PancakeSwap’s roadmap?
The anonymous team of PancakeSwap asks to better call their roadmap a to-do list because this is how they work: “as fast as we can, on the things we can.” Apparently, the roadmap does look like such a list:
CAKE staking and the basics of the NFT ecosystem are the things besides the core features already launched in PancakeSwap. Now, the team is working on the NFT-based gamification where you will be able to complete tasks to earn NFTs, borrowing & lending services for BSC and LP tokens, and margin trading for buying and selling BSC tokens with leverage.
What are the perks of PancakeSwap?
Wide choice of assets
The most popular BSC-based tokens along with rarer ones, stablecoins, and numerous wrapped assets are available for exchange and providing liquidity on PancakeSwap.
Compatibility with Ethereum
PancakeSwap is well-prepared for users that seek to migrate from Ethereum. The interface is well-known for all Ethereum DEX users; connecting the same MetaMask or Trust Wallet is possible. As for developers, Binance Smart Chain made it easy to convert any ERC-20 token to a BEP-20 format and deploy it on BSC and PancakeSwap.
Low fees and fast transactions
PancakeSwap leverages the general advantages of Binance Smart Chain: transaction fees between $0.04 and $0.2 that the Ethereum users can yet only dream of, and an average transaction time of 5 seconds.
PancakeSwap is non-custodial, meaning that while trading and with this protocol, users’ funds always remain in their wallets and the team doesn’t have access to them. CertiK blockchain security platform has carried out an audit of PancakeSwap and proved it is secure.
How can I profit with PancakeSwap?
Provide liquidity to pools
As we’ve discussed above, users can provide liquidity to pools and get rewarded. Here’s how it works: go to the Liquidity page on PancakeSwap, connect your wallet (hit the button at the top right corner of the page), and click Add Liquidity. After you do it, you will get some LP tokens that will represent your share in this pool.
Whenever a user swaps their tokens in a pool, they leave 0.017% of their transaction volume in this pool. This money adds to the amount of LP tokens proportionally between all the liquidity providers: say, if you get 1 LP BUSD-CAKE LP token after providing liquidity, you will have 1.05 LP tokens after a number of swaps are processed in the pool. When you want to return your liquidity, you will convert LP tokens back into tokens that you provided, and apparently, there will be more than the initial amount.
Farm LP Tokens
You can stake your LP tokens to get extra rewards with up to 190% APR. See the list of available farms and choose one or a few based on the predicted APR and your trust in the tokens. Provide liquidity to the chosen pools and stake the LP tokens in these farms — this will bring you CAKE tokens.
Stake CAKE in Syrup pools
One step further to multiply your profits with PancakeSwap is staking your CAKE in one of the single-currency Syrup pools. It works very simply: after you lock your CAKE in one of the pools, you will start getting rewards with a chosen token, and you can click Harvest to collect your earnings.
In the Auto CAKE pool, you don’t only receive interest, but it automatically compounds daily: earnings add to your stake, and the APR increases. In other pools, you can also reinvest your interest, but that needs to be done manually.
What is the price prediction for the CAKE token?
CAKE has made outstanding progress in 2021, starting at $0.6 in January and hitting $21 by August. This is even more than some of the services predicted: CoinGape was expecting CAKE between $8 and $15 in 2021. The solid use case and ever-growing user base helped the token surge.
How can I buy PancakeSwap (CAKE)?
An obvious solution for buying CAKE is PancakeSwap: if you have some BSC-based BEP20 BNB or BUSD, you can get CAKE there instantly at low fees. Once you have it, you can immediately start making more profits by putting CAKE into one of the Syrup pools.
However, if you’d prefer buying CAKE with any non-BEP20 coin or token, ChangeNOW is at your service. Here, you can buy CAKE with Bitcoin, Ethereum, or any other of 200+ assets at low fees in just a few minutes. No registration and KYC is required.
What wallets are the best for storing CAKE?
Trust Wallet is designed by the Binance team, so it has perfect support for BEP20 tokens and the entire BSC ecosystem including PancakeSwap. You can connect this wallet to the DEX in your browser and enjoy the opportunities of yield farming right away.
MetaMask was originally designed for Ethereum, but as the DeFi domain evolved, the team has also embraced Binance Smart Chain. To add BSC to MetaMask, follow this official quick guide in Binance Academy — it will take you just a few minutes.
MetaMask easily connects to PancakeSwap, and allows for storing your CAKE and LP tokens together with all other BSC-based assets. The wallet has once earned the love of the Ethereum fans and is now doing so with the Binance Smart Chain users.
PancakeSwap: the future of DeFi and farming
PancakeSwap is one of the platforms that drive the entire Binance Smart Chain. This DEX is one of the factors why users are actively migrating to BSC from Ethereum: low fees, great yield farming options, and ERC20 compatibility facilitate this process. Earning with PancakeSwap is easy, and millions of users seize this opportunity.
To learn more about how decentralized exchanges work and why they are more secure than centralized ones, see this article. Here, you can learn about Uniswap, PancakeSwap’s main counterpart on the Ethereum network.