You’ve heard of SushiSwap, and UniSwap, but have you heard of PancakeSwap? PancakeSwap is another alt coin which is slowly taking the cryptocurrency world by storm as it climbs up the charts each week. Just what is PancakeSwap? And should you invest in it? Well, the answer to these questions widely depends on what you want to use the coin for.
What is PancakeSwap?
PancakeSwap is a decentralized cryptocurrency marketplace which is run on the Binance Smart Chain. It aims to be one of the most liquid markets when it comes to exchanging alt coins on a DEFI marketplace. This means that users will be able to swap almost any cryptocurrency immediately on the platform. PancakeSwap has a native token known as CAKE.
How Does It Work?
Like many other coins in the same area, most notably UniSwap, PancakeSwap runs on an Automated Market Maker protocol or AMM. This means that prices for coins on the exchange are decided by a mathematical algorithm. So if a user wishes to trade a token, they can do so without having to wait for a person to match their order. Instead, the token they are selling goes into a liquidity pool. These liquidity pools are backed by users who put up their cryptocurrencies in exchange for the fees earned off of swapping cryptocurrencies. This makes it easy for people to exchange cryptocurrency any time day or night without a governing centralized body.
CAKE has no hard cap, meaning infinite amounts of the coin can be created. The tokens can also be created using a method known as farming, which is where users deposit their tokens and cryptocurrencies and they are locked up in smart contracts. Users can also farm other tokens using this method, most notably BETH, USDT, BUSD, USDC, DAI, and TWT. Users can also stake CAKE to earn more CAKE tokens, this is done via something known as the syrup pool.
PancakeSwap also has a lottery system run on the CAKE tokens. Each lottery ticket costs 10 CAKE and you will be given a string of four numbers. The lottery cycle takes 6 hours and the winner is announced at that time. There are prizes for two, three, and of course, four matching numbers.
Who Started PancakeSwap?
Surprisingly, PancakeSwap was developed by an anonymous team, making the platform truly decentralized in a way that is reminiscent of Satoshi Nakamoto’s development of Bitcoin. The platform launched in September 2020 and has already been making huge waves in the DEFI world. The code behind PancakeSwap is basically the same of that which is behind UniSwap and SushiSwap with only a few minor changes—which is a common practice in the DEFI exchange world these days. As it is easier to copy and tweak open-source code rather than develop a program from scratch.
How Do You Use PancakeSwap?
To use a DEFI exchange like PancakeSwap, or any other of the DEFI exchanges listed above, you will need a Metamask browser. This is a browser which is used to connect to the cryptocurrency world. The browser has a wallet which you will need to load with some Ethereum in order to use it. Then you can head to the exchange and begin using it to swap, farm, or stake various cryptocurrencies and tokens, it’s that easy!
Where Did Token Farming Come From?
If this is the first time you are hearing about alt coin and token farming, you aren’t alone. This is a new practice which rose to prominence during the summer of 2020. Token or cryptocurrency farming can also be called yield farming and it is when tokens or coins are deposited in order to generate returns. The reason this came about is because as the cryptocurrency world continues to grow, there became an increasing need for cryptocurrency-based loans, which is what makes up most of the farming world. It’s likely that the popularity of farming will only continue to grow as more and more people become familiar with the cryptocurrency world.
What is an IFO?
While researching the world of cryptocurrency farming, you may come across the term IFO. And IFO is an initial farming offering which is basically the same as an ICO as it allows users to invest in unreleased tokens or cryptocurrencies by farming them, or basically lending them to the company which is starting up. PancakeSwap is famous for holding IFO’s which it does frequently. In order to participate in an IFO on the platform, you will need to invest the native CAKE in the project you wish to farm. And if the project is successful, you will receive your initial investment back as well as a profit if everything goes well. IFO’s were invented as an easier way for companies to get financial backing, as they are generally seen as slightly less risky than a traditional ICO for investors.
Should I Invest in PancakeSwap?
It’s hard to evaluate the risk and returns of a coin like PancakeSwap because it is simply so new to the market. And not only that, but because its creators aren’t known, you can’t evaluate their vision for the coin. It is a bit difficult to find information on the CAKE token, and this could be because of a lack of company backing the token or because it’s so new. But the lack of information could also indicate good or bad things about the coin. This is a conclusion you will have to make for yourself.
As for token farming, if you like a little gamble, it’s probably worth it for you to engage in some sort of farming activity. But keep in mind that CAKE isn’t the only token or coin which can currently be farmed. Nor is PancakeSwap the only platform which offers these capabilities. So if you are truly interested in farming for cryptocurrency, it might be worthwhile to shop around and see which exchange has the best coins available to farm at a risk level you can tolerate.
Be aware that token or cryptocurrency farming is risky, in fact several sites compare it with gambling. So if this is something you want to do, you need to make sure you recognize all the risks associated before you put your hard-earned cash (or Ethereum) into any project in the DEFI world.