PancakeSwap: The Famous Crypto DEX Step by Step

In this guide we explore step by step the famous crypto DEX PancakeSwap. It currently ranks 3rd in the ranking of the largest cryptocurrency exchange

PancakeSwap is a decentralized exchange (DEX) that facilitates the exchange of cryptocurrencies on multiple blockchains in a trustless manner, without the need for a centralized intermediary. It was launched in September 2020 as a fork of Uniswap during the “DeFi Summer” and quickly became the leading exchange of the BNB Chain ecosystem. The infrastructure of PancakeSwap was developed by Binance with the intention of offering its users a platform for trading cryptocurrencies on decentralized exchanges.

Over the years, PancakeSwap has expanded to support nine blockchain networks, including Ethereum, Aptos, Arbitrum, and others. It has also added a range of new features beyond the simple interface for buying and selling digital tokens. A few months after its launch, PancakeSwap attracted many investors and liquidity providers due to the excellent incentives offered on the “liquidity mining” front.

Users could lend their cryptocurrencies to the platform to facilitate liquidity for trading and, in return, they would receive rewards. This practice is still in place today, although it has lost the FOMO of the early years when practically everyone operated on the DEX.

At the center of PancakeSwap is the utility token CAKE, which serves governance and staking functions. Many of the returns offered by the platform are paid in CAKE, and several liquidity pools are pegged to this coin. Currently, CAKE has a market capitalization of $430 million, although in the past it reached 7 billion.

How to trade crypto on PancakeSwap?

After the initial presentation, let's now see how to use the crypto DEX PancakeSwap for trading digital coins. First of all, the first thing you need to do is enter the homepage of the platform and connect your non-custodial wallet. We find a wide range of supported decentralized wallets, including Metamask, Trust Wallet, Coinbase Wallet, Binance Web3 Wallet, Opera and many others.

Once connected, we can start trading crypto by going to the “trade” option and selecting one of the available pairs on the DEX. Unlike centralized exchanges that operate through an order book, decentralized platforms like PancakeSwap use an “Automated Market Maker” (AMM). This means that trades are not managed by a buy and sell order book, but are governed by an equation Y*X=K, where Y and X are the prices of the tokens in the pool and K is the constant of liquidity.

If from the technical side the issue may seem complex for the less experienced, on the practical side doing decentralized trading is really simple. By selecting for example the Ethereum network and choosing the ETH-CAKE pool, we notice how the trading interface is very intuitive.

Just indicate the quantity of ETH you want to sell for CAKE (or vice versa) and PancakeSwap will indicate the quantity of tokens you will receive and the associated fees. Click “swap” (prior approval if required) and confirm the transaction in the connected decentralized wallet. Attention: based on the reference chain you will have to pay the due gas fees (for example: on Ethereum you pay with ETH; on BNB Chain with BNB etc.)

We recommend beginners to test the platform with small amounts of capital before starting to operate with large sums of money. It is also recommended to pay attention to the liquidity present in the smaller pools and avoid trading at high slippage.

Additional features of PancakeSwap

As already mentioned, PancakeSwap not only allows you to buy and sell crypto, but it offers a wide range of additional features. With the platform, we can, for example, earn returns on our assets by staking in the various liquidity pools, which are listed under the “pools” heading. On CAKE, for example, there is currently a promo offering up to 25.81% APR as yield, which is paid in the same deposit token.

If you want to receive returns in CAKE, you can also consider the “farms” section where by adding a liquidity pair you will have an economic incentive Same goes for the “position manager” feature recently introduced where LP managers rely on a more efficient automated management.

Among the other interesting features offered by PancakeSwap, there is an area entirely dedicated to crypto gaming. Inside it, we find a lottery where users can buy tickets and hope to win the draw prizes. Or a predictions section where one can bet on the short-term trend (bull or bear) of certain tokens. Very interesting also the “quest” section where simply by completing tasks you earn rewards in crypto.

Not to forget the presence of a bridge for cross-chain crypto transfers and a platform for perpetual futures or options trading. From simple functionalities like the “swap”, PancakeSwap thus also integrates a variety of other more or less complex products to use. This makes the DEX a complete decentralized platform, where you can carry out any cryptographic activity in DeFi.

PancakeSwap: TVL and on-chain analysis

PancakeSwap is the third largest DEX in the crypto sector for “Total Value Locked” (TVL), behind only Curve and Uniswap. Overall, according to DefiLlama data,