DeFi Guides


What is Pancake Swap, and its native asset – CAKE? 

Everything you need to know about Pancake Swap, a decentralized exchange (DEX) built on the Binance Smart Chian, and its native governance token - CAKE

If you think of it as American breakfast, you’re not incorrect; after all, who names a decentralised exchange after a meal? In the crypto business, especially among decentralised finance (Defi) projects, these kinds of things aren’t unusual. 

SushiSwap and BakerySwap, for example, are examples of decentralised finance (Defi) initiatives that prefer to name their platforms after delicious meals. Well, that’s not the main purpose of this guide, so let’s dive right into the main discussion here.

What is Pancake Swap?

Launched in September 2020 as a Decentralised Exchange (DEX), Pancake Swap is a Defi application built on the Binance smart chain. And just like the leading DEX – Uniswap, it also makes use of a model called automated market-maker (AMM). 

Moreover, Pancake Swap shares some notable similarities with its closest rival, Sushi Swap, featuring things like community governance and the ability to farm liquidity providers’ tokens.

By employing the AMM exchange model, Pancake Swap allows users, also known as liquidity providers, to add funds to a liquidity pool and get compensated with a native token in the process. 

Likewise, because the AMM model does not provide an order book that enables pair-to-pair trading, users who didn’t fund the liquidity pool can trade against it for-profits, although, after paying a trading charge.

Understanding Pancake CAKE, and how to farm it

Similar to other DEX platforms, Pancake Swap also offers a native governance token known as CAKE. The native BEP-20 token can be traded alongside others of its kind on the platform’s liquidity farming.

On the topic of farming, liquidity providers (LP) can stake i.e, lock their preferable LP token, for a period of time and be rewarded with the platforms’ native currency – CAKE once the farming has yielded profit.

Currently, there is a long list of LP that can be staked on the platform, however, the prominent ones among them include the following;

  • TWT – BNB LP

Asides from the regular liquidity pool for different LPs, users who like to maximise their profit can also stake in the SYRUP pool which is strictly for CAKE holders. How does this work?

After you’ve harvested your CAKE from the first liquidity pool, which accommodates a variety of LPs, you may reinvest (i.e stake) your profits in the SYRUP pool to make even more CAKE. Although the SYRUP pool is strictly for CAKE holders, you may farm other sorts of LP tokens from it.

Pancake Governance

It is also important to note that Pancake Swap also has a governance system where CAKE holders can propose and effect modifications on the platform through a voting system. And just like most DEX’s out there, a member must have first staked an amount of CAKE to be eligible to the voting right.

Other features of Pancake Swap

Aside from farming the liquidity and SYRUP pool, Pancake Swap has a number of additional functions that users may exploit to increase their income on the platform. The following are some of these functionalities:

Pancake Lottery: One task that Pancake Swap executed well is including enough entertaining activities within its platform. Lottery is an uncommon feature on most DEX platforms; however, Pancake Swap included it into the platform, enabling interested users to buy tickets with CAKE, wait for a draw, and receive their winnings in CAKE if they are among the winners.

Prediction Market: Another entertaining feature on Pancake Swap is the prediction market, which although, still in the beta form, allows users to predict price movement. The prediction market is similar to most trading events out there, only that Pancake Swap offers a more interactive user interface that is easy to navigate even as a beginner. 

Pancake Collectibles: This particular feature doubles as the platform’s non-fungible token (NFT) section. However, unlike other platforms where you mostly have to purchase the NFT to own one, winners of Pancake collectibles are selected randomly based on the rule of participation. If chosen as a winner, you can thereafter trade your NFT for the CAKE value, or if otherwise, keep it in your wallet as a collector’s item. 

Team Battle: Users can also participate in different Team battles where they are allowed to randomly join a team of their choice, participate in trading events in order to win a prize that will be collectively shared among members. Prize to be won here ranges from CAKE, collectible NFTs, and many more perks. However, there are rules of participation, which must be strictly adhered to by each participating member. 

What is Pancake Initial Farm Offering (IFO)?

Similar to the model employed for Initial Coin Offering (ICO), Pancake Initial Farm Offering (IFO) allows users to access and buy brand new token with a brand new token sale model.

While this feature rmploys the yield farming model, a user must have an active Pancake Swap profile to participate. Once that is sorted, a user can then proceed to stake CAKE and BNB in Liquidity pool to get LP tokens which will be spent on acquiring IFO sale tokens. 

Once the IFO sale tokens goes live, there is an option to “commmit” your LP tokens to buy the tokens being sold. And at the end of the IFO sales, users can proceed to claim any of the acquired IFO tokens, while unspent LP tokens will be credited in the user’s wallet.

Ultimately, Pancake Swap is one of the biggest DEX built on the Binance Smart Chain, and its a major contender to a host of other exchanges built on other chain system like Ethereum

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.