what is pancakeswap

PancakeSwap, a decentralized exchange on Binance Smart Chain, offers users low-fee, fast trading of BEP20 tokens via an automated market maker (AMM) system, bypassing traditional intermediaries and boasting over 4.4 million users.

Mar 21, 2025 at 03:19 pm

What is PancakeSwap

Decentralized finance (DeFi) has been constantly impacting the traditional financial industry in the past few years. DeFi uses blockchain technology to build a financial ecosystem without the participation of middlemen, brokers and banks. Many people believe that it has democratized finance, and that as long as you have a crypto wallet and can access the Internet, anyone can trade digital assets in real time. PancakeSwap is a leader in the DeFi field, with 4.4 million users worldwide and a pledge amount of more than US$3 billion.

PancakeSwap is a decentralized cryptocurrency exchange (DEX) built on Binance Smart Chain (BSC), which relies on its own CAKE tokens. It adopts the automatic market maker (AMM) model, where users trade digital assets through liquidity pools instead of matching counterparties on the order book.

As a decentralized exchange, PancakeSwap allows users to exchange their tokens for other tokens without the need for intermediary services. Launched in 2020, the platform is known for its high liquidity, rich features and growing popularity in the blockchain space. Users can trade BEP20 tokens and Binance Coin (BNB) without relying on middlemen and without losing control of private keys.

It's similar to Ethereum's Uniswap, but it's different because it runs on the Binance Smart Chain. PancakeSwap focuses on BEP20 tokens, which is a token standard developed by Binance. It is essentially a token blueprint that stipulates the rules for the use of tokens, such as how to conduct transactions. The design of BEP20 allows developers to issue a variety of different tokens in a flexible format. PancakeSwap is not only one of Uniswap's main competitors, but also the most popular decentralized exchange on Binance's smart chain. Due to Ethereum's high gas fees, it offers cheaper and faster trading options than Uniswap.

In addition, PancakeSwap's security is also guaranteed. The platform has been audited by blockchain security companies such as CertiK. Although the platform is anonymous, it is also open source, ensuring complete transparency of transactions.

How PancakeSwap works

PancakeSwap adopts an automatic market maker (AMM) mechanism, and user transactions do not require intermediary promotion. Users trade with liquidity pools, rather than trading with counterpartys, and obtain a certain share of the rewards generated by the transaction.

Liquidity pools are essentially fund pools built by users. Users are incentivized to provide funds for liquidity pools through pledge rewards obtained from transaction fees and become liquidity providers. The pledge reward is calculated based on the share of the liquidity provider in the liquidity pool.

This system means that users do not need to match the seller. When they want to trade tokens, they simply deposit the token into the liquidity pool and they can be exchanged for another token.

In addition, PancakeSwap also provides a game-like experience. Users can bet on the rise and fall of Binance Coin prices within a certain period of time, and can also use the lottery function to win free tokens. 

How to use PancakeSwap

Create a compatible wallet

If you want to use PancakeSwap, you first need to create a wallet compatible with BNB Chain, such as MetaMask, Coinbase Wallet and BNB Chain Wallet. Take MetaMask as an example. Although it is an Ethereum wallet, it also has the ability to connect to other blockchains such as BSC and Polygon. After creating a compatible wallet, go to the PancakeSwap website, click "Connect Wallet", follow the instructions to complete the operation, and you can easily connect to your wallet.

Add liquidity

Once the wallet is connected successfully, you can use all the DeFi features of PancakeSwap, such as adding liquidity to a liquidity pool on the platform. The specific steps are as follows:

Click the "Trade" menu in the left sidebar;

Select “Liquidity”;

Click "Add liquidity";

Select the token pair you want to deposit;

Sign the transaction from your wallet (this step is free);

After completing the above, you will receive a Liquidity Provider (LP) token, which represents your share of the liquidity pool.

Once you own LP tokens, you can take advantage of PancakeSwap's various functions, such as income cultivation, staking and trading NFTs.

PancakeSwap features

Trading function

If you have limited funds, PancakeSwap may be the trading platform for you. Trading on this decentralized exchange requires no large amount of money. The steps to start the transaction are as follows:

Enter the "Trade" menu and select "Redemption";

Select the cryptocurrency you want to exchange from the menu;

Click the "Exchange" button and confirm the transaction for free in your wallet, and the transaction will be completed.

Unlike other platforms, on PancakeSwap, you trade with user-generated liquidity pools. It should be noted that since the platform is built on Binance Smart Chain, it can only trade BEP20 tokens. If you only hold ERC20 tokens, you can convert them into BEP20 tokens through Binance Bridge to trade on PancakeSwap.

Staking mining function

Mortgage mining adopts the LP mortgage certificate mining model, so the supported market-making token pairs need to be added to the fund pool first. The specific operations are as follows:

Click "Fund Pool", click "Add Liquidity", and select such as BNB/BUSD (example);

After setting the quantity, click "Approve BUSD" to perform the first operation authorization;

After the first authorization is completed, click "Supply" again to send the token. After completing the authorization, you can see your market making record in the fund pool;

Click "Farm" at the top to enter the farm and select the BUSD - BNB mining pool. The 10X in the upper left corner represents the mining weight. The higher the value, the faster the mining speed;

The first operation also requires clicking "Approve BUSD - BNB FLIP" to authorize;

After the authorization is completed, click the plus sign on the right side of the gray Unstake to set the number of FLIPs in the staking interface and authorize.

Staking Features

In PancakeSwap, staking CAKE (pizza token) can obtain SYRUP. Holding SYRUP not only allows you to get CAKE rewards, but can also be used for subsequent functions such as pancake exchange lottery and general governance. The operation steps are as follows:

The first operation requires authorization to "Approve CAKE". After the authorization is completed, click the plus sign to add the CAKE token;

Set the number of CAKEs that need to be mortgaged, click "Confirm". After the authorization is successful, you can see the number of CAKEs that are mortgaged, the number of CAKE rewards that can be harvested, and the number of redemptions of the top SYRUP;

If you no longer need stake, click "Unstake" to complete the reward collection and CAKE token redemption operations.

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