Video https://www.youtube.com/watch?v=wtKrQMRAV3g How does PancakeSwap work? Like Uniswap, PancakeSwap is primarily an automated market maker protocol. This means that, instead of trading against other users, you swap token pairings supplied by liquidity providers. A liquidity provider is someone with a lot of tokens to spare, who funds a pairing of a trade so that people can easily swap those tokens. Liquidity providers earn fees each time someone makes a trade.
Like Uniswap and other automated market makers, PancakeSwap’s algorithms reroute trades between different coins. For instance, if you wanted to swap BNB, the native token of Binance, for CAKE, the native token of PancakeSwap, and there weren’t enough coins in the liquidity BNB/CAKE liquidity pool, PancakeSwap might swap your BNB for another token, BUNNY, and then trade BUNNY for BUSD, and then trade BUSD for CAKE. Although this mechanism means you might have to pay lots of transaction fees, it creates a reliable structure for a decentralized exchange.
PancakeSwap offers other services. People who stake their tokens on PancakeSwap earn LP (liquidity pool) tokens. They can stake these coins in farms on PancakeSwap to earn even more money. The CAKE-BNB LP farm offers returns of 37.16% per year. These tokens can be redeemed for a share of the pool’s assets. For syrup pool, auto CAKE offers return of 78% per year.
You can also stake tokens in PancakeSwap’s “syrup pools” to earn returns. CAKE’s tokenomics schedule (the way the CAKE economy works) distributes CAKE tokens to syrup pools after a certain number of transactions are processed. For staking CAKE, you can earn SYRUP tokens, which are “basically an IOU that shows how much CAKE you’ve staked in the pool.” This is returned when you unstake your CAKE from the pool.
PancakeSwap also has a lottery system, whereby you can buy a ticket for $5 and win prizes of CAKE. CAKE is a cryptocurrency token that can be sold, in a roundabout way, for cash. As of this writing, each CAKE token is worth $19 and the whole token has a market cap of $4.9 billion. (By comparison, Uniswap’s token, UNI, has a market cap of $18 billion).
There’s a prediction market on PancakeSwap, which lets you predict (bet) whether the price of BNB will rise or fall against a US dollar stable coin. As described by PancakeSwap: “If you enter an ‘UP’ position, and the BNBUSDT ‘Closed Price’ is higher than the ‘Locked Price’ at the end of the 5 minute LIVE phase, you WIN! And if it’s lower, you lose.”
There’s also a kind of ICO system. An ICO, or Initial Coin Offering, is when a new cryptocurrency project sells tokens before it’s completed work on its crypto project. Investors hope that they increase in value. ICOs raised billions of dollars in 2017 and 2018 but the U.S. Securities and Exchange Commission eventually judged lots of these sales to be illegal. PancakeSwap offers Initial Farm Offerings, which lets customers invest in new tokens using CAKE-BNB LP tokens.
PancakeSwap is also working on an NFT marketplace. (NFTs are cryptocurrency tokens that represent ownership over, more often than not, a digital asset, such as a piece of digital art.)
The protocol is decentralized, and although there is an (anonymous) development team behind the project, its community can vote on core decisions with its CAKE tokens. This is what is known as a decentralized autonomous organization. CAKE is a so-called governance token.
