April 02, 2024

What is PancakeSwap?

PancakeSwap is a decentralised exchange (DEX) built on the Binance (BNB) Smart Chain. Much like Uniswap and Sushi, PancakeSwap uses liquidity pools and smart contracts to create the DEX, and creates liquidity by offering yield farming rewards to market makers.

Like other DEXs, users earn rewards for their stake – PancakeSwap’s native token is CAKE, which users will earn based on the size and specifics of the pool, referred to as ‘Syrup Pools’.

In this article, we cover what PancakeSwap is, the unique rewards PancakeSwap offers, as well as where the platform is heading in the future.

Beginnings of PancakeSwap

Founded by a group of anonymous developers, PancakeSwap began in September 2020 as a fork of Uniswap only weeks after SushiSwap’s (Sushi) launch in August 2020.

A unique selling point of PancakeSwap is that it is built on the Binance Smart Chain, whereas almost all others are built on Ethereum. 

Ethereum, while a reliable basis for a DEX, was suffering from sluggish transaction speed and expensive gas fees. Ethereum was suffering from success, as DeFi’s movement in 2020 was driving huge demand for transactions, slowing a lot of the DEXs down.

PancakeSwap offered a new option, and being built on BNB Smart Chain (BSC), offered a cheaper and faster alternative.

Swap fees were around 0.3%, and at the time, PancakeSwap was able to offer 0.2%. Due to this unique selling point, PancakeSwap grew rapidly and now sits in all the top rankings for DEXs, with a market share of around 4.3% and a total value locked (TVL) of approximately $2bn – surpassing its competitor Sushi after a significant rise in 2021.

Who owns PancakeSwap?

The developers of PancakeSwap have remained anonymous ever since creation, and all go only by the moniker of ‘chef’, with the two leads seen to be referred to as ‘Hops’ and ‘Thumper’.

There are approximately a dozen people, potentially more who were working on PancakeSwap, and there are likely to be more now. The anonymity of platforms like PancakeSwap and Sushi is in line with the philosophy. A DEX is governed by the community, and keeping founders anonymous maintains the communal spirit, and removes any chance of it becoming centralised and controlled by one or a few people.

Unique features of PancakeSwap

PancakeSwap, like many other DeFi platforms and DEXs, relies on unique branding and benefits to attract new users. But PancakeSwap has invested heavily in unique branding and products.

Here are some of the unique features of PancakeSwap:

The PancakeSwap Lottery

A unique feature of PancakeSwap is The PancakeSwap Lottery, which allows users to enter a daily lottery. This is a gambling product within PancakeSwap that uses CAKE, and is separate from the liquidity pools and PancakeSwap economy.

Winners will be rewarded based on how many numbers they guessed correctly. Matching just the first number will reward you with a small portion of the CAKE lottery pool, and the more numbers you guess correctly, the greater your rewards.

Matching all six numbers will reward you 50% of the lottery pool, as well as NFT rewards.

PancakeSwap NFT Marketplace

PancakeSwap hosts an NFT marketplace where users can buy and sell NFTs on the Binance Smart Chain. Users can also list their own NFTs on the marketplace, but need to send an application to PancakeSwap.

Users can also earn Pancake Bunnies through competitions and rewards, which are PancakeSwap’s own NFTs.

PancakeSwap Gaming Marketplace

Similar to the NFT marketplace, PancakeSwap also has a gaming marketplace, where users can play games to earn CAKE tokens and NFTs. This expansion of the ecosystem shows that PancakeSwap is interested in user engagement, and liquidity being used in other ways.

PancakeSwap also encourages game developers to add their games to their marketplace, which further extends the ecosystem.

Benefits of PancakeSwap

These novelty products are what have set PancakeSwap apart from Sushi and Uniswap, and will perhaps be the root of PancakeSwap’s success. Despite starting at a similar time to Sushi, PancakeSwap has surpassed Sushi, and is now among the top DEXs on the market.

PancakeSwap’s extension to NFTs, gaming and lottery, shows the focus on accessibility and pioneering in the integration of a DEX with everyday entertainment and spending.

Aside from these extra products, PancakeSwap offers some benefits over its competitors.

One of the main features of PancakeSwap is the lower transaction fees as well as faster transaction speeds, due to the efficiency of the Binance Smart Chain. However, this has led some to suggest that PancakeSwap is not a true DEX – as Binance owns and runs the Binance Smart Chain, meaning PancakeSwap is reliant on a centralised exchange.

PancakeSwap v4

Looking to the future, PancakeSwap will be rolling out v4 in Q3 of 2024 – likely at a similar time to Uniswap. PancakeSwap v4 will also launch on the BNB Smart Chain, as well as Ethereum, so it can be considered fully decentralised.

Similar to Uniswap, PancakeSwap also intends to release ‘hooks’ – essentially a tool which allows developers to customise liquidity pools and add in features such as an order type or custom curves.

It also plans on introducing Flash Accounting and also Donation. PancakeSwap is likely to innovate in more ways this year, and extend its offering into new markets that the DeFi space has yet to step into.

Conclusion

PancakeSwap has made huge leaps in the DeFi space since its creation in 2020, and has developed products previously unseen in the DEX space. It is likely to release even more products, and due to the TVL and market cap, it’s likely that other DEXs will see PancakeSwap’s example and follow suit.

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Author

Caleb is a financial copywriter with a specialisation in fintech and forex. Former copywriter at Barclays and Paysafe. Contributing writer for LiquidityFinder. You can message Caleb here.