PancakeSwap and CAKE: what they are, how to farm and the future of trading

Farming, staking, lottery: understand how the project works

PancakeSwap is a Decentralized Exchange (DEX) that has caught the attention of many DeFi users and investors. Its native token, $CAKE, has also received a lot of interest and has seen a considerable rise this year. As with Uniswap in the past, PancakeSwap stood out for its potential as a decentralized blockchain broker. In this article, we introduce PancakeSwap and its main features.

What is PancakeSwap?

PancakeSwap is an “Automated Market Maker” (AMM), the largest decentralized broker (DEX) installed on the blockchain Binance Smart Chain. The development of Binance smart chain was in September 2020 by anonymous developers, with food and design themes with concepts from the game world. It is used for trading BEP-20 tokens (which are the equivalent of ERC-20 tokens from the Ethereum network).

In AMM-type models, the trading of digital assets takes place by pairing the user with a liquidity pool, and not with other users directly in an order book. At PancakeSwap broker, users can buy, sell or exchange any tokens (cryptocurrencies) that are listed. As a decentralized broker, anyone can list new BSC tokens. It is in these types of brokers that the famous meme tokens such as Dogecoin appear first. Here you can see a list of the new tokens registered with PancakeSwap, as well as others that are scheduled for registration in the near future.

Like Uniswap and other DeFi protocols of its kind, PancakeSwap allows users to also deposit their tokens to provide liquidity (staking) and in return receive the protocol token – the $CAKE in this case. CAKE tokens can be used to redeem funds from the liquidity pool, plus a bonus from platform trading fees. They can also be traded separately, exchanging CAKE for other tokens. This and other strategies for generating CAKE will be described below.

Farming, staking, lottery and NFTs

Platforms like this have become popular for the possibility of increasing equity in tokens through two main methods, “yield farming” and “staking”.

Staking consists of providing liquidity to specific pools, blocking funds. This is beneficial to the platform, which needs liquidity to function, and to the user, who receives a portion of the transaction fees as compensation. In PancakeSwap, CAKE pools are called Syrup Pools. In them, the user can passively block their CAKE to receive more CAKE, or even other tokens.

Yield Farming is more complex and requires active involvement, but allows the user to retain their position in other tokens while passively receiving earnings. For a particular Farm on the platform, the user needs to enter the LP (Liquidity Provider) token specific to the desired farm token. After blocking funds and receiving the LP tokens, the user can put them into the farm to yield more CAKE.

The strategy works as a double stake, or as a loan to leverage profits in case the LP token price rises. Investors use their own personal strategies to deal with Yield Farming, but a basic guide can be found on the PancakeSwap page.

There is also a lottery on the platform, whose ticket costs 1 CAKE. The draw is always a sequence of 4 numbers, each randomly chosen between 1 and 14. The maximum prize, if the player hits the exact sequence, is 50% of the entire lottery pool.

NFTs are non-fungible tokens, which represent unique collectable objects. They are cute pets, such as pets and creatures, which can be exchanged for the corresponding value in CAKE or kept in your wallet, in a personal collection. A user can only win the NFTs through a random draw if they register for a chance to participate.

Updates

PancakeSwap's list of Syrup Pools is constantly being updated and can be checked on the platform's website. One of the most recent updates was the partnership with MEXC Global (formerly MXG broker). PancakeSwap has, since June 3 this year, a Syrup Pool for the MX/BUSD pair. In addition to this, PancakeSwap this month announced a new Syrup Pool for Bondly, the development of NFT protocol for arts, games, music, etc., and for Unmarshal, a multi-chain network providing data for dApps.

The CAKE cryptocurrency

As a result of PancakeSwap's successful activity in general, the CAKE native token quote has risen significantly. In 2021 alone, the currency rose 6.796%, trading at a maximum of US$43.92 on April 30 of this year. Today it is just under 17 dollars, having suffered a sharp drop throughout the month of May, in line with the entire cryptocurrency market. Market capitalization is around US$3.1 billion, 37th in the cryptocurrency ranking.

The main reason for this appreciation has been the increase in the volume of token trading on the platform. This indicator is even used by investors to predict possible increases in the price of specific tokens. However, large volumes can also result from mass liquidations, chain reactions that occur during large price drops, such as the month of May.

Some believe this may still be happening with CAKE. Recently, the price has been sideways, which generates great expectations from investors regarding the next market movement. On June 12, last Saturday, trading volume rose sharply to levels not seen since the end of May — which could indicate the imminence of a strong rally, or continuation of liquidations. Caution and careful observation are recommended, as the analysis of a single factor (such as volume) is not sufficient for a reliable forecast.