Decentralized finance (DeFi) is on the rise, and with it, new financial versions revolve around autonomy, speed, and inclusivity — three qualities missing from the traditional financial sphere.
This is particularly true for the emerging decentralized exchange (DEX) market, where users interact more frequently with autonomous marketplaces supported by blockchain technology.
PancakeSwap, the BNB Chain (formerly Binance Smart Chain) version of decentralized exchanges like UniSwap (UNI) and SushiSwap (SUSHI), is a perfect example of such a market.
What Is PancakeSwap?
A native to the BNB Chain, PancakeSwap is a decentralized exchange. In other words, it is similar to well-known platforms like UniSwap in that users can exchange coins directly without using intermediary services.
The sole distinction is that PancakeSwap is centered on BEP20 tokens, a particular token standard created by Binance. In order to work with the larger Binance ecosystem of DApps, wallets, and other services, new tokens must adhere to the BEP20 standard, which is effectively a checklist of tasks they must be able to complete.
How PancakeSwap Works?
Those unaware of how decentralized exchanges operate a unique mechanism called an automated market maker (AMM) to eliminate the need for order books or a single, intermediate entity to conduct trade.
Since traders deal with liquidity pools rather than counterparties, there is no requirement for an order matching system. In this sense, the term “liquidity pool” refers to money deposited into smart contracts by investors, who can be anyone from anywhere in the globe, to give traders access to liquidity.
This technique eliminates the need for buyers to wait to be matched with sellers or sellers to wait for buyers. To exchange one token for another, users need only add their existing token to the pool and take out the desired replacement token.
For instance, all you need to do to convert a specific BEP20-based token, such as ALPHA to BNB on PancakeSwap, is find an ALPHA/BNB pool with sufficient liquidity (i.e., enough tokens in the pool to support your trade). Your ALPHA tokens would then need to be deposited, and based on the current exchange rate; you would immediately receive a certain number of BNB.
But PancakeSwap is not only for traders. You could also work as a liquidity provider (that is, you can deposit tokens in a liquidity pool for the chance of earning a share of trading fees paid by those trading against the pool in question). Another way to make money on PancakeSwap is through yield farming. With this, you can farm the CAKE token.
PancakeSwap vs. Uniswap vs. SushiSwap
Three significant decentralized exchanges now retain control in the world of cryptocurrencies.
Uniswap — The first Ethereum-based DeFi liquidity protocol is called Uniswap. ERC-20 tokens and primarily ETH pairs are the current trend for simple cryptocurrency trading.
SushiSwap — SushiSwap is a community-run fork of Uniswap that provides token swaps, farming, and crypto lending and borrowing.
PancakeSwap — Using BEP-20 tokens and the BSC–ETH bridge, PancakeSwap clone built on BSC provides quick and affordable exchanges.
Only Sushi and PancakeSwap offer benefits to token holders that stake their tokens, even though all three permit decentralized exchange, community governance, yield farming, and LP (liquidity provider) options.
What’s So Special About It?
By eliminating the intermediaries in centralized exchanges, PancakeSwap allows other users to benefit directly. With some liquidity pools and staking options, the profits can be enormous if you’re ready to lock up your tokens for a while.
Of course, as with other DEXs, crypto novices will probably find it challenging to use PancakeSwap and comprehend its various features. However, it can be worthwhile for you to spend the time figuring it out.
Should You Invest In PancakeSwap In 2022?
Our CAKE price forecasts indicate long-term growth; the price outlook for 2026 is $65.061. The profit of PancakeSwap (CAKE) pricing modifications is anticipated to be roughly +564.48 percent with a 5-year profitable investment.
Digital Coin Price PancakeSwap price forecast suggests that the coin’s value might increase thrice in just six years, or by 2026 when the chart should show a definite rally around $15.81.
The currency may trade at about $64.86 by the end of the first year and $522.461 by the end of the following five years, according to the GOV Capital PancakeSwap (CAKE) price prediction.