Cryptocurrency exchanges generally fall into two categories- centralized and decentralized. Centralized exchanges are similar to traditional stock exchanges where you can buy and sell securities. Decentralized exchanges are closer to the core cryptocurrency principles of decentralization and privacy. There are no intermediaries and cryptocurrency buyers and sellers transact among themselves on a peer-to-peer network.
If you are also looking for a decentralized exchange for crypto trading, you might want to have a look at PancakeSwap. Strictly speaking, it is a Decentralized Finance(DeFi) platform where users can swap BEP-20 tokens. Launched in 2020, it is among the top 5 decentralized exchanges as per CoinMarketCap.
PancakeSwap is one of the most popular DeFi systems with $3.6 billion worth of funds staked on the platform and an estimated 1.5 million monthly users.
PancakeSwap Overview
PancakeSwap is a Decentralized Exchange(DEX) that works using the Automated Market Maker(AMM) model. A group of anonymous developers launched it in 2020. PancakeSwap stands out among its competitors due to the fact that it is built on Binance’s native BNB Chain instead of Ethereum. It enables users to swap BEP-20 tokens on the BNB Chain.
PancakeSwap is an alternative to DApps developed on the Ethereum network which often faces the problem of slow transaction speed and high gas fees. It also has a native token CAKE which launched at a price of $1.37 and is hovering in the range of $3-$4 in early 2023.
PancakeSwap Features and Services
PancakeSwap Exchange
On PancakeSwap, you can easily swap one BEP-20 token for another via automated liquidity pools. You have to pay only a 0.25% fee for trading on the exchange. Along with token swaps, PancakeSwap also supports limit orders and perpetual trading.
Yield Farming
PancakeSwap has yield farms where you can deposit your crypto assets into liquidity pools and earn CAKE by staking your LP tokens. You get not only LP rewards APR for providing liquidity but also Farm base rewards APR for staking LP tokens. There is a dedicated syrup pool where you can stake CAKE for a fixed or flexible term to earn more CAKE tokens.
StableSwap
StableSwap enables stable pair trades such as USDT-BUSD with a lower slippage and more efficiency. It is particularly designed for closely priced assets or liquid staking tokens. Impermanent loss is not a big issue on StableSwap and even the trading fee paid is lower in comparison to normal AMM.
Lottery
PancakeSwap has regular lottery programs where users can get CAKE tokens. One ticket costs only $5 and you can purchase 100 tickets at a time. Even if your ticket matches just the first number with the drawn number, you will get a small prize. The amount won by each ticket though depends on the number of winning tickets in the same prize bracket.
Prediction
PancakeSwap has a prediction market where users can bet on the price movement of token pairs. For example, take CAKEBUSD. You predict their price when the LIVE phase starts and at the end of the 5-minute phase, you can see whether you won or lost depending on the Closed Price and the Locked Price.
Pottery
The Pottery feature combines CAKE lock-staking with lottery elements to enable users to earn higher yields on their deposits. A minimum of 1 CAKE needs to be deposited and it can be withdrawn only after the 10-week lock period is over. 8% of the prize pot distributed weekly is kept as fees for burning.
NFT Marketplace
Non-Fungible Tokens or NFTs are digital tokens that represent the authenticity of things like artwork or music. PancakeSwap runs an NFT marketplace where you can buy and sell PancakeSwap collectibles.
Initial Farm Offering(IFO)
IFOs on PancakeSwap get you early access to new tokens as soon as they are added. To participate in an IFO, you need to lock your CAKE in the Syrup Pool and get iCAKE which is the exclusive currency for buying tokens in IFOs.
Cryptocurrencies Available on PancakeSwap
You can swap a number of tokens on PancakeSwap simply by connecting your crypto wallet to the platform. Some of the top tokens on PancakeSwap are:
- BUSD(BUSD)
- Tether(USDT)
- Wrapped BNB(WBNB)
- Ethereum(ETH)
- PancakeSwap Token(CAKE)
- Ai Shiba(AISHIBA)
- USD Coin(USDC)
- Dai Token(DAI)
- StargateToken(STG)
- StatusNetwork(SNT)
PancakeSwap Fees
PancakeSwap works with the Automated Market Maker(AMM) protocol. Here, there are no central order books to match buyers and sellers. Instead, there are liquidity pools which are just a group of digital assets bound together by a smart contract. Liquidity Providers(LPs) stake their assets on the platform to create liquidity.
The LPs are compensated for staking their crypto either with a percentage of the transaction fee or in the form of crypto. On PancakeSwap, a portion of the trading fees is added to the liquidity pool.
Trading Fees
A trader pays a 0.25% fee for trading on PancakeSwap. Out of that, 0.17% is paid to the liquidity pools of the swap pair. 0.0225% of it is sent to the PancakeSwap treasury and 0.0575% is kept for CAKE buyback and burn.
For perpetual trading, the maker fee is 0.02% and the taker fee is 0.07%. However, users can get a 5% discount on the trading fee if they use CAKE to make payments.
Withdrawal Fees
PancakeSwap does not charge any withdrawal or transfer fees on the platform. However, a network fee would still have to be paid to the blockchain to conduct these transactions.
StableSwap Fees
The StableSwap feature has lower trading slippage as well as lower trading fees than normal AMM. The USDT-BUSD, USDC-BUSD, and USDC-USDT pairs attract a trading fee of 0.15% while the HAY-BUSD pair has a trading fee of only 0.04%.
Security Review
PancakeSwap is a decentralized exchange and like most DEXs, your funds are safe in the sense that you don’t have to transfer them to a third-party custodian like in the case of centralized exchanges. Hence, you do not lose your funds even if the exchange is hacked.
PancakeSwap employs multi sig for all its contracts and the contracts are also time-locked for added security. The contracts have also been verified on BscScan and therefore, the users get what they see.
Firms like Peckchield, Snowmist, and Certik have conducted security audits for PancakeSwap and given it a positive rating. Also, the PancakeSwap vault has anti-flash loan protection to protect the CAKE token from flash loan attacks.Â
Further, since PancakeSwap is built on open-source software, public visibility and accessibility of the site and its smart contracts ensure maximum transparency in the operations of the platform.
PancakeSwap also runs a Bug Bounty Program to detect and find a solution to vulnerabilities in its smart contracts, websites, and apps. Users are compensated according to the level of the bug reported. A critical bug reported in PancakeSwap’s smart contracts and blockchain can fetch rewards up to $1,000,000.
PancakeSwap was hacked once in 2021 through the means of a DNS hijack. However, it should be noted that it only affected the website’s front end and its smart contracts were not compromised.
Pros of PancakeSwap
Wide Range of Products
PancakeSwap offers a wide range of products to its users such as spot trading, yield farming, and initial farm offerings. It also runs frequent lottery programs where users get a chance to get large amounts of CAKE tokens. In short, there is something for everyone on PancakeSwap.
Immediate Trading
All you have to do to trade on PancakeSwap is to connect a BNB Chain-compatible crypto wallet and you are good to go. You don’t need to go through the effort of completing your KYC and then waiting while it is verified. You can just trade on PancakeSwap by connecting your wallet.
Control of Private Keys
Since PancakeSwap is a non-custodial exchange, users retain control of their private keys. They do not need to transfer their assets to a third-party custodian and the possibility of a loss of funds due to a system hack is very low.
Low Transaction Cost
PancakeSwap charges a flat 0.25% fee for trading on the platform. This is lower and simpler than rivals like Uniswap which have multiple fee tiers with the highest being 1% for exotic pairs.
Earning Opportunities
You can earn some income on your crypto assets by staking them on PancakeSwap. Since the rewards are distributed in proportion to the contribution, the more you put in the more you earn. It offers some high APRs including up to 37% on CAKE-BNB and nearly 150% on others.
Community Governance
On PancakeSwap, users can vote on proposals for the platform. This encourages community governance on the exchange by enabling the community to have a voice in the development of the platform.
Cons of PancakeSwap
Cannot Trade Bitcoin
Since PancakeSwap is a BNB Chain platform, you cannot trade BTC or many non-BEP-20 tokens on it. It supports only a limited number of Ethereum network tokens which can be a limitation for certain users.
No Native Wallet
PancakeSwap has no cryptocurrency wallet of its own where users can keep their crypto. They have to first get a BNB Chain compatible wallet and then connect it to PancakeSwap for trading and storing their cryptocurrency.
Impermanent Loss
While the idea of earning via PancakeSwap’s liquidity pools might be tempting, there is also the risk of impermanent loss in them. You face a major loss if there is a major change in the price of your deposited assets.
No Customer Support
PancakeSwap has no official customer support channels. Users either have to rely on the troubleshooting page to get solutions or try to get help and advice from the community at large on social media platforms.
Possibility of Scams
Since the platform has no proper customer support, scamers pretending to be customer support agents can easily con unsuspecting users on PancakeSwap.
Customer Reviews
PancakeSwap is rated Poor on Trustpilot with a score of 2 out of 5 and 117 reviews. Some customers find the lack of KYC refreshing as they do not have to go through lengthy verification processes before trading. They also find the fees charged to be standard and the platform easy to use.
Customers like that they can avoid the hassle of KYC on PancakeSwap
Users find the fee charged to be okay and like the CAKE pool on the exchange
Some users, however, have had trouble navigating the exchange and have also complained of lags on the website.
Some users are not much impressed by PancakeSwap’s user interface
The lack of proper customer support seems to be a common complaint of PancakeSwap users. It also does not seem to have the best prediction models. Some users have expressed concern about the lack of a verification process for coin listing.
Customers criticize the lack of support on PancakeSwap
Customers find the listing of scam coins on the platform concerning
PancakeSwap Frequently Asked Questions
Is PancakeSwap a Safe Exchange?
Yes, PancakeSwap is a largely safe exchange. It has been audited by the cyber security firm Certik and has a positive rating. Also, since it is a non-custodial DEX, the chance of customers losing their funds due to a system breach is minimal.
Is PancakeSwap a Cryptocurrency?
No, PancakeSwap is not a cryptocurrency. It is a decentralized exchange built on the BNB Chain and used to swap BEP-20 tokens. It, however, has a native crypto token called CAKE that can be used for transactions on the platform.
Does PancakeSwap Require KYC?
No, there is no KYC verification process on PancakeSwap. You just need to connect your wallet to the platform and you are good to go. This is perfect for traders who value their privacy while trading in crypto.
Conclusion
PancakeSwap is a DeFi protocol with some exciting and innovative products in its kitty. It is a non-custodial platform perfect for users who want privacy and anonymity while trading and do not want to go through the hassle of KYC verification. The democratic governance of the platform by the community makes the platform more appealing.
However, on the downside, PancakeSwap is a largely self-service platform and you are pretty much on your own if you have any trouble on the platform. At the most, you can try to find solutions with the help of the PancakeSwap community on Telegram or Discord.
Hence, it is probably better to get into PancakeSwap only if you are sure of your ability to navigate DEXs and can ensure the security of your private keys and recovery phrases.