Are you planning to start your trading journey on a trusted and affordable DeFi exchange? With the freedom to control your assets and how they function, it is easy to see why decentralized finance (DeFi) is among the most appealing aspects of the cryptocurrency business. But, Ethereum’s high transaction fees can overshadow these advantages, resulting in expensive and slow transactions.
That's where PancakeSwap comes in as an effective clone of Uniswap. This DEX is based on the Binance Smart Chain. It provides decentralized finance services with significantly cheaper transaction costs and faster speeds. With so much to offer, it's an exchange worth exploring in detail. So, without delay, let’s dive into a detailed exploration of PancakeSwap.
What is PancakeSwap?
As mentioned, PancakeSwap is a DEX (Decentralized Exchange) built on the BNB Chain, formerly known as BSC and Binance Chain.
Before we learn what PancakeSwap is, we must first understand what a DEX is.
A DEX is a peer-to-peer (P2P) marketplace where crypto traders transact directly with each other. DEXs fulfill one of crypto's primary functions: they facilitate financial transactions not mediated by banks, payment processors, brokers, or any other type of middleman.
BNB Chain, created by Binance, is a blockchain that can use smart contracts, just like the Binance Chain. It’s compatible with Ethereum Virtual Machine (EVM).
BNB Chain is similar to Ethereum because it’s built on the same technology (Ethereum Geth client). However, due to its higher transaction limits and quicker block processing, the BNB Chain is comparatively faster and cheaper for DeFi activities. This makes it easy for projects from the Ethereum ecosystem to run on the BNB Chain.
Now, as a DEX based on the BNB Chain, PancakeSwap allows its users to effortlessly swap BEP-20 standard tokens. But what is the correlation between DeFi and DEX?
Simply put, the basic concept behind DeFi and DEX was to decentralize global money. Hence, DeFi platforms were created to offer a new way of handling finances by using smart contracts on blockchains instead of traditional methods controlled by central authorities. Among these, decentralized exchanges (DEXs) like Uniswap and SushiSwap gained popularity.
From my experience with PancakeSwap, I can tell you it's a standout option among decentralized exchanges. When I first got into DeFi, I noticed problems like slow transactions and high fees on Ethereum due to its popularity among DApps.
Then, in September 2020, Binance introduced the Binance Smart Chain (BSC), which focused on speed. That's when PancakeSwap appeared, quickly adopting this approach and offering impressive features, making it a strong competitor among DEXs. But what sets it apart?
PancakeSwap's special feature is that it lets you swap coins directly without any middlemen. What's interesting is that PancakeSwap, being closely connected to the Binance Smart Chain, mainly deals with BEP20 tokens, a token standard developed by Binance. This standard acts as a checklist that new tokens must meet to work smoothly within the wider Binance ecosystem, including DApps, wallets, and more.
If you're looking for efficiency and cost-effectiveness in DeFi, PancakeSwap's focus on BEP20 tokens and its straightforward swapping process make it a top choice among decentralized exchanges.
My Overall Thoughts on PancakeSwap
As a trader who prefers being in control of my trading with complete anonymity and affordability, I find Pancakeswap ideal for three key reasons:
- User-Friendly Interface: PancakeSwap provides a smooth and simple platform, making it ideal for both novice and professional traders.
- Low Transaction Fees: The exchange has incredibly low transaction fees, ensuring user investments remain cost-effective. In fact, the recent launch of Pancakeswap v3 now introduces 25x lower trading fees for traders compared to its v2.
- Robust Security Procedures: PancakeSwap employs significant security procedures like bug bounties and audits to protect users' assets and data.
From my view, with these features and its reliability, PancakeSwap stands out as an excellent DEX platform for cryptocurrency enthusiasts. Now, let’s explore these features in more detail.
Key Features and Advantages of PancakeSwap
Other than the basics, it is worth noting that PancakeSwap stands out among the competitors for its various features and advantages. These include:
Negatives and Disadvantages of PancakeSwap
Aside from the positives, I do have some reservations about this decentralized platform. My major issues with it being:
What Services Does PancakeSwap Offer?
To experience the advantages of PancakeSwap, you must first contribute liquidity to its pool. How does this process work?
Well, it's quite straightforward actually! When you invest in the liquidity pools, you not only receive a fee but also earn CAKE (LP tokens), all of which are BEP-20 standard tokens. You can then use these tokens in various ways to pursue returns and income on PancakeSwap. Now, let's delve into some of the essential services and features PancakeSwap provides.
Spot Trading: Spot trading on PancakeSwap is carried out by swapping assets in a liquidity pool via an automated market maker (AMM). An AMM system uses automated trading to provide liquidity to the exchange it operates on. What's unique here is that AMM swaps are generally done live, with the price fixed by the ratio of assets in the pool. But this also means you have no decisive control over the price you buy or sell assets.
Don't worry, PancakeSwap does offer a solution to this difficulty by offering a pre-set order option through the limit order tool on its interface. Unlike centralized exchanges, this does not involve matching one order against another. Instead, once the pre-set price objective is satisfied, the AMM executes a swap on its liquidity pool.
However, remember that PancakeSwap doesn't accept limit orders for tokens having a fee/tax on the 'transfer' of tokens. Instead, open limit orders will be open forever unless users execute or cancel them. There are, however, future plans for a customizable expiration functionality if it remains open.
While PancakeSwap is based on the BSC network, transaction speeds are much faster and less expensive than Ethereum's. But to maximize this benefit when executing swaps on PancakeSwap, make sure you use the V2 or V3 swap. It is better because the older version of the exchange is more prone to slippage, which may result in financial loss.
NFTs and NFT Marketplace: Besides the basics, PancakeSwap stays ahead of the competition by creating its own NFT collections. The exchange allows users to establish personalized exchange profiles by tying them to an NFT. If that wasn't cool enough, the exchange also features its own NFT marketplace where you can trade white-listed NFT collections.
PancakeSwap also makes NFTs available to its users through team trading games. In these games, traders compete to see who has the highest trading volume in a given time period or during PancakeSwap airdrop events.
Trading Competitions: PancakeSwap offers a lot of opportunities for users (like myself) to earn rewards through trading competitions and raffles. Specifically, the exchange hosts trading competitions where the participant with the highest trade volume emerges as the winner.
As I already mentioned earlier, your chances of winning a reward increase as you continue to trade on the platform. One popular competition that PancakeSwap hosted was the 'Mines of Dalarnia' event, which was initiated in May 2022. This competition featured a huge prize pool of tokens worth $120,000 and additional NFTs. Needless to say, these kinds of opportunities make PancakeSwap an engaging platform for active traders like me.
Community Governance: Last but not least, I can’t end the list of PancakeSwap features without mentioning its voting system. As a community-driven platform, PancakeSwap allows the community to vote on team proposals. Yes, every user’s opinion matters to the PancakeSwap team. Speaking of which, I also actively contribute to these voting activities to help improve the platform.
But that's not all! In fact, as a community-driven exchange platform, PancakeSwap also allows its community to submit recommendations. The team then examines these proposals, which can be advanced to the vote level, where, again, the community decides what suggestions they support through their votes.
What I Don't Like About PancakeSwap
As I mentioned earlier, like any other platform, even PancakeSwap has some downsides that limit it for various users. Some drawbacks I found during my experience with PancakeSwap include:
Limited Asset Selection: PancakeSwap only supports tokens on the BEP-20 network, i.e., those housed on the Binance Smart Chain. Because of this, it lacks the asset selection of larger centralized exchanges like Binance. Hence, you can't trade with prominent tokens like Litecoin and Bitcoin, on PancakeSwap.
In contrast, being the largest crypto exchange globally, Binance supports over 600 cryptocurrencies. This allows its millions of users to explore and profit from a larger world of cryptocurrency trading by accessing prominent and newer crypto tokens.
Centralization Concerns: Another notable downside I’ve observed when using PancakeSwap is that it operates on the Binance Smart Chain (BSC), which is classified as a centralized blockchain. This design choice has raised concerns among some users, including me, regarding network centralization and control.
While BSC has its strengths, it completely deviates from the core decentralized principles of cryptocurrencies. This creates room for security threats, including the potential for significant breaches or insecure storage of user information.Note: When determining whether to use PancakeSwap or similar sites, I suggest you balance these drawbacks against the benefits and make an informed decision.
Unlike most decentralized exchanges, PancakeSwap does not charge fees for withdrawals. However, you can only withdraw tokens to your cryptocurrency wallet. This means the exchange doesn't directly support converting the tokens to money and sending them to a bank account.
But wait, that's not all! Even though PancakeSwap is noted for its low transaction fees, I wouldn’t suggest you overlook certain costs linked with using the platform. Specifically, the exchange charges users a trading fee of 0.25% of the transaction amount when they trade on PancakeSwap. You also have to pay gas fees to complete transactions on the Binance Smart Chain.
As I mentioned, PancakeSwap's fees are often lower than other decentralized exchanges, especially compared to Ethereum-based systems. This is due to the Binance Smart Chain's design to enable quick and low-cost transactions, making it an appealing option for traders looking to minimize fees.
Additionally, there are various techniques traders can use to reduce fees when utilizing PancakeSwap. For this, I suggest you to:
Use limit orders instead of market orders. This really helps me reduce slippage and cut my trading fees.
I also suggest you avoid trading during periods of heavy network congestion, which can cause gas prices to skyrocket.
Ultimately, even when there are fees involved with utilizing PancakeSwap, they are often lower than those linked with other decentralized exchanges, making it an appealing option for price-conscious traders.
Pros and Cons of PancakeSwap
- Lower trading fees compared to other exchanges
- It features an intuitive interface
- Users of PancakeSwap can earn a variety of Non-Fungible Tokens (NFTs).
- You can create your own projects inside the BSC community
- The exchange allows you to control the private keys of your tokens
- The exchange doesn't feature a native wallet
- It doesn't support trading of BTC and other non-BEP-20 tokens
There is no denying that PancakeSwap is one of the world's largest decentralized exchanges. In fact, the best part about trading on this platform is that it allows you to exchange tokens hosted on the Binance Smart Chain. And, if you already have a crypto wallet, signing up for the platform is simple. Once you do, you can exchange tokens or lend them to earn on the platform.
Additionally, you can acquire PancakeSwap's native CAKE tokens through various other services. Adding to its stand-out features, PancakeSwap also has an easy-to-use UI and one of the most comprehensive feature sets available on a decentralized exchange. This is also one of the reasons I personally prefer trading on PancakeSwap.
But while I praise this unique set of features, I suggest you also keep in mind PancakeSwap’s fee structure and limitations, like its support for limited cryptos. You can only determine whether it is the ideal option for your trading needs by considering both the positive and negative traits.
I hope this detailed review of PancakeSwap will help you make a more informed decision.
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