What is PancakeSwap (CAKE)? How to use pancakeswap?

PancakeSwap (CAKE) platform; It is an automated market maker (AMM) where users can trade tokens, lock their assets in investment pools and generate passive income.

It is possible to generate passive income by depositing money into pools or providing liquidity to the protocol on the PancakeSwap platform, which is a typical Decentralized Exchange (DeFi) application, through “yield farming”.

You may be interested in: What is Yield Farming? Making Money with DeFi

The local currency of the protocol is called CAKE.

Who developed PancakeSwap? When did CAKE come out?

Developed to run on Binance Smart Chain, PancakeSwap was launched as of September 2020. Supporting the BEP20 token standard, the platform offers various alternatives for users to generate revenue in return for the assets they lock.

PancakeSwap, which operates as a Binance Smart Chain based Decentralized Exchange (DEX), was implemented by unnamed developers.

How does PancakeSwap work?

Users who want to earn income from pools lock their assets into the system according to the type of investment they want. For this, they need to perform a conversion to token type called “Liquidity Provider (LP)” according to the type of asset they will lock.

How to use pancakeswap

For example, the user who wants to make income through the CAKE-BNB option must deposit an equal amount of PancakeSwap Coin (CAKE) and Binance Coin (BNB), calculated over the current exchange rate.

The token named CAKE-BNB LP is purchased when the deposited amount is amounted. This token is locked in the relevant pool and starts to be earned. Each user provides revenue equal to the ratio of the amount locked to the system in the pool. CAKE-BNB LP tokens are also called FLIP.

If users wish, they can only come by locking the CAKE tokens in their hands to the system (staking). Pool systems that provide less profit compared to the Yield farming method are used to reduce the risk.

Ek okuma: What is Staking? Is Staking Profitable?

pancakeswap cake impermanent loss

Although the liquidity provider tokens obtained by combining two different tokens provide higher returns, the current price of the protocol locked token, called impermanent loss, may occur with the price difference when deposited into the stake pool. If this happens, the user will be out of potential profit.

What makes PancakeSwap different

In the PancakeSwap protocol, where there is no order book system used in traditional crypto money exchanges, trading is made directly over liquidity pools.

The user can earn CAKE by providing liquidity or locking their assets into the pool.

pancakeswap lottery

Lottery is also held regularly on the platform. If they wish, users can buy lottery tickets in exchange for CAKE tokens. Four numbers between 1 and 14 are randomly chosen in lotteries that last around 6 hours. Half of the money collected in the lottery pool is given to the user or users whose ticket has these four numbers in the same order. A certain amount of the collected tokens is reserved for the token burning process while the rewards are distributed to the winners.

On the other hand, the protocol also offers assets named unique tokens (non-fungible token, NFT). NFTs that can be purchased for collectible purposes can then be put up for sale.

PancakeSwap statistics: How many CAKE are in circulation?

As of May 2021, the total amount of assets locked to the PancakeSwap protocol was around $ 10.3 billion, according to CoinMarketCap data. The market value was calculated as 6.4 billion dollars. The number of CAKE tokens in circulation was recorded as 160,447,894.

How to get CAKE?

PancakeSwap supports Binance Smart Chain (BSC) powered wallets. CAKE assets can be stored with digital wallet options such as MetaMask, TrustWallet, TokenPocket and WalletConnect.

The easiest way to buy CAKE may be to use traditional cryptocurrency exchanges. CAKE can be purchased through exchanges such as Binance, KuCoin, Gate.io.

Of course, it is also possible to convert BSC-compliant currencies to CAKE tokens through the PancakeSwap protocol.

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DISCLAIMER: The statements contained here are not investment advice. Never trade without researching the markets thoroughly and without comments from different circles. Read the comments of the investors you trust and consult their opinions. Remember that every trading transaction involves risk. Make your own decision when taking any action. Cointelegraph cannot be considered directly or indirectly responsible for any damages or losses arising or allegedly arising from investment products or services.

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