Let's dive in and go over, starting with what PancakeSwap is and how you can stake, and see how to use PancakeSwap to take advantage of its amazing features!
How to Use Pancakeswap: A Detailed Beginners Guide
Decentralized finance, also known as DeFi, is a revolutionary idea that aims to make society financially equal by eliminating the need for intermediaries. In recent years, DeFi's popularity has seen a surge with continuous developments and cutting-edge, innovative solutions. Several DeFi protocols have evolved, allowing users to stake funds and receive the protocol token as a reward.
Many of these DeFi protocols are based on the Ethereum blockchain network. This overdependence on the Ethereum network led to several challenges, including slow transaction speeds and high gas fees. As a result, a Binance-backed fastest protocol with low gas fees called PancakeSwap has emerged as a potential Ethereum competitor. Currently, PancakeSwap may not have the same daily trade volume as Uniswap or SushiSwap, two of Ethereum's biggest DEXs; it still has gained a large user base because of its features.
Let's dive in and go over, starting with what PancakeSwap is and how it works, to see how to use PancakeSwap to take advantage of its amazing features!
What is PancakeSwap?
The PancakeSwap is a food-themed decentralized exchange (DEX) powered by Binance Smart Chain. It was launched in September 2020 by anonymous developers, and as soon as PancakeSwap was released, it was certified and validated by leading security companies such as Certik and SlowMist. With its impressive trading volume and overall operations of at least 31 million in a month, PancakeSwap is currently the 3rd largest AMM platform behind UniSwap or SushiSwap.
In addition to having community governance, PancakeSwap provides users with liquidity, allows them to trade BEP20 tokens, and offers other specific features that make it stand out among other DEXs.
Before explaining how to use Pancakeswap, let's look at how it works and its important features.
How Does PancakeSwap Work?
PancakeSwap works on an automated market maker (AMM) model instead of the traditional market model. AMM model allows traders to use permissionless liquidity pools to trade digital assets. The liquidity pool means that the PancakeSwap traders do not need to deal with an order list or find someone to trade tokens with. They can swap any number of tokens using this feature while becoming liquidity providers (LPs) and depositing their coins in pools to share trading fees.
Moreover, PancakeSwap's AMM model lets users earn as much as they want by contributing more to liquidity pools. Users also have the option to farm their CAKE tokens. CAKE is an original BEP-20 token that can be used for staking, mining, and other functions related to DeFi.
Where to buy CAKE:
If you are interested to know how to buy pancakeswap we have created a detailed guide for you. You can use the exchanges below to buy CAKE to make the most of PancakeSwap.
|Exchange name||Deposit method|
|KuCoin||Cryptocurrency, PayPal, Wire transfer, Credit or Debit Card, SEPA|
|Crypto.com||Credit card, Cryptocurrency, PayPal, TransferWise, SEPA|
|Paybis||Bank transfer, Debit card, Neteller, Credit or Debit Card|
Trade, Earn, and Win are the three core features of PancakeSwap.
Here is a brief of each one:
- Trade: Even though PancakeSwap is a decentralized exchange, its most basic feature is trading BEP-20 tokens. The LP tokens that you earn by adding liquidity can be traded for other BEP tokens of your choice.
- Earn: On PancakeSwap, users can earn CAKE (or other supported tokens) with huge APYs. The most profitable way to earn on PancakeSwap is from Syrup Pools, Yield Farms, or Liquidity Pools (LPs).
- Win: There is also the lottery section, in which millions of dollars are up for grabs. Over 11,000 players participate in this lottery event each day. Trading competitions can reward the participants with NFT collectibles. Moreover, users can earn BNB tokens if they correctly predict the price of the tokens.
Additionally, PancakeSwap offers other several exciting features such as Yield Farming, Decentralized Exchange (DEX), NFT Market, IFO (Initial Farm Offering), and Voting (Governance).
How To Use PancakeSwap:
Here we will discuss in detail how to use PancakeSwap to access its features. PancakeSwap can be used in various ways, but let's look at the most standardized method to make things more practical.
For this method to work, you will have to set up a Trust Wallet, buy BNB, and then connect Trust Wallet to PancakeSwap so you can access all of its features.
Continue reading to learn how this works.
- Buy BNB Tokens: Pancake Swap revolves around Cake tokens and BNB coins, so firstly, you'll need to purchase some BNB. The Binance Wallet can be used to purchase BNB, and since Trust Wallet belongs to the same company, you will not face any problems moving funds between Binance and Trust.
If you acquire BNB in Binance, you will incur gas fees and trading fees, so consider this cost according to your objectives (staking, swapping, or farming) before purchasing BNB.
- Convert BNB from Your Binance Chain: When BNB coins are transferred to Trust Wallet, they will be converted into Binance Smart Chain tokens. And these Smart Chain tokens are the ones that will put power into all your operations in PancakeSwap. PancakeSwap is a DApp (decentralized application), which can only be accessed through Trust Wallet's DApp browser. To enable PancakeSwap on your Android device, just navigate to the DApp Browser tab in Trust Wallet by clicking the settings icon and enable it here.
- Connect Trust Wallet to Pancake Swap: If the DApp browser has been enabled, the next step is to connect your wallet to the decentralized exchange. The process is pretty easy:
- Open PancakeSwap on your smartphone
- Find the "Connect" option in the upper right corner
- Select "Wallet Connect" rather than Trust Wallet. Finally, click connect, and you're done!
- Convert Tokens and Use PancakeSwap's Features: Using PancakeSwap is now straightforward. After you have connected your wallet to PancakeSwap, you will get access to all of PancakeSwap's features that we have discussed above:
- Trade, where you can exchange tokens;
- Earn, where you can see Farms and Pools options;
- Win, which gives you access to Lottery and Competition options;
- NFTS, where you can check hundreds of non-fungible token collections;
Go for a feature you want to use!
What Is PancakeSwap Liquidity, and How Does It Work?
The main feature of the AMM model is the liquidity provided by users. Without it, the platform's algorithm for fast transactions at low prices would not work. To promote this feature, PancakeSwap awards its native CAKE token to liquidity providers.
It is easy to provide liquidity on PancakeSwap:
- Connect wallet. Once your wallet has been connected, select the BNB/BUSD token pair you want to trade from the "Trade" menu in the Liquidity section.
- Now Add liquidity. Tokens added to one half of a pair will automatically fill the other half because a pair must contain tokens of equal value. You will also be provided with details on your proportional shares, determining the amount of LP tokens you will earn. These LP tokens will be named based on the pair of tokens you entered, for example, BNB-USD LP (in this case).
- Stake your LP tokens. Now that you have your recently minted LP tokens, you can stake them in their respective pools in PancakeSwap by scrolling down the list and clicking "Enable" and then confirming the deposit in the connected wallet.
- Earn CAKE. Upon depositing your LPs, you will start earning CAKE credits at the specified APR rate. Clicking the "Harvest" option will allow you to redeem your rewards.
- Earn more CAKE. You can then use this new CAKE to stake in a Syrup Pool to generate even more CAKE. The PancakeSwap transaction fee is 0.2%, with 0.17% going to liquidity providers. Click the Liquidity tab and select the token pairs you want liquidity for.
How to Remove Liquidity on Pancakeswap?
To unstake your LP token, click the minus option next to the "Farms" tab, and then go to the "Liquidity" tab and return your LP tokens to redeem your stake.
Those who serve as liquidity providers will receive their share of the tokens pool and any other tokens they earn from the trading fee. However, due to a temporary loss of tokens, you may receive fewer tokens than you initially deposited.
Risks of Providing Liquidity on Pancakeswap
While providing liquidity can be a great way to generate passive income, it does come with risks, like any investment.
- Impermanent loss: A major risk of providing liquidity to an AMM like PancakeSwap is that you could sustain a permanent loss when taking your tokens back out of a pool. Because liquidity pools operate according to a ratio-based algorithm, both tokens must be valued equally in dollar terms. Changing the value of one token in a pair will change the ratio of tokens in the pool. That may ultimately result in a loss based on how the market moves.
- Smart contract risk: Though PancakeSwap is certified by CertiK, a smart-contract auditor, this does not eliminate all the risks involved in using the platform. Any system based on smart contracts is susceptible to bugs and hackers and may result in a total loss of funds.
What Is Pancakeswap Farming and How Does It Work?
You can earn greater rewards over time by staking your LPTs (liquidity provider tokens) in a liquidity pool. This practice is known as yield farming.
LP token holders typically move their tokens around according to the APR (annual percentage rate) based on monthly, weekly, daily, and annual returns. The APR fluctuates over time, so farmers actively move their tokens.
PancakeSwap requires participants to have already contributed tokens with liquidity before they can engage in yield farming. Following are the steps to do PancakeSwap farming:
- Go to the PancakeSwap "Farms" section.
- Make sure you pick the pool for the tokens you offered liquidity for.
- Confirm the transactions by clicking "Enable" in the wallet.
- Choose the number of LP tokens you wish to stake.
- Check your CAKE earnings over time in the farm section.
- Click on "Harvest" and confirm the transfer if you want to harvest your freshly-earned CAKE.
- You can also stake your CAKEs to gain more tokens by joining Syrup Pools.
How to Earn CAKE from Pancake Swap via Syrup Pools?
PancakeSwap's Syrup Pools serve as another way for users to earn additional tokens while providing liquidity. Community-vetted Binance Smart Chain projects are distributed to CAKE Holders using these pools. There is a visible APR for each pool, and each pool owner shares a portion of their fresh tokens with CAKEs holders.
To participate in Syrup Pool, follow these steps:
- Go to the PancakeSwap "Pools" section.
- Choose the pool in which you want your LPs staked.
- Verify the issuance of CAKEs tokens.
- Set your stake amount.
- Earn passive rewards after you confirm the deal.
Similarly, PancakeSwap also allows you to withdraw your assets by selecting "Harvest" on your stakeholder pool.
What Is the Pancakeswap Lottery, and How Does It Work?
In addition to stakes and farming CAKE, PancakeSwap's LP tokens are useful for entering a lottery. Buying an entry ticket costs one CAKE, and the Lottery will print a random 4-digit combination for users. If you match two numbers correctly, you will receive a jackpot portion. You do not need to match all four numbers to win.
Below are the steps to use the Lottery feature:
- On the PancakeSwap homepage, select Lottery.
- Purchase tickets by clicking Buy Tickets.
- Click Enable when you have entered the number of tickets you wish to purchase. At the moment, each ticket costs approximately 0.34 CAKE.
- There are two options for buying:
- Buy Instantly: If you buy instantly, six random numbers are assigned to your ticket automatically.
- View/Edit Numbers: It displays the current number series and allows you to randomly select the numbers.
- Choose one option and confirm. An additional fee will be charged.
- As soon as you complete the purchase, scroll to the bottom of the page to see all the information related to the Lottery, including the details of all the rewards and the timings of the draw. Click "View" to check the ticket details. To purchase additional tickets, click the option "Buy Tickets." With this, you've successfully purchased a PancakeSwap Lottery ticket. After that, wait for the results, and once the results are out, compare your numbers!
What Is Initial Farm Offering (IFO), and How Does It Work?
Through an Initial Farm Offering (IFO) feature, token holders can stake LP tokens on pools to earn novel tokens. However, participants need to have a CAKE-BNB LP token to participate in IFO.
Here are the steps you need to follow to join the PancakeSwap IFO feature:
- Select the menu option in the top left corner and then select IFO.
- Set your profile to active. Stake your CAKE-BNB to get CAKE-BNB LP tokens.
Pros and cons of PancakeSwap
|Low transaction fees and less congestion than Ethereum-based DEXs||There is a smaller range of available tokens compared to Uniswap.|
|With PancakeSwap, liquidity providers have numerous opportunities to earn additional income, in addition, to yield farming.||Automated market makers are subject to the Risk of irreversible losses.|
|An active user community, ranging from IFOs and NFTs to lotteries, and a system that||The development team is anonymous, providing little financial or business background|
|allows the community to propose governance changes and vote on them|
|Token pairs include a variety of unique tokens that cannot be found on other DEXs||The audit is only conducted by one entity|
How to resolve the "No Provider Was Found" Error on PancakeSwap?
Using PancakeSwap on a mobile browser will result in a "No Provider Found" error. Mobile browsers such as mobile Chrome and mobile Safari do not support DApps. The first step to resolving the issue is to stop using Pancake on your mobile browser and instead make use of the DApp browser on your Trust Wallet. You will notice that the error will be resolved by opening PancakeSwap on the DApp browser and attempting to link your Trust Wallet.
How to Fix "Insufficient Output Amount" on PancakeSwap?
PancakeSwap users may also experience problems with "Insufficient output amount." It occurs when a low slippage tolerance is used, which will prevent your order from executing. You must increase the slippage tolerance to at least 12% by increasing it by 1% in steps until you can successfully swap your tokens.
With Decentralized Finance (DeFi) gaining traction every day, the amazing features of PancakeSwap have made it one of the fast-growing DEX over the last few years. While Ethereum's gas fees and network congestion continue to rise, PancakeSwap might be able to compete with rival exchanges in the future.