About PancakeSwap

The PancakeSwap price is $1.54, a change of -1.64% over the past 24 hours as of 9:15 a.m. The recent price action in PancakeSwap left the tokens market capitalization at $325,565,845.24. So far this year, PancakeSwap has a change of -51.56%. PancakeSwap is classified as a DeFi under CoinDesks Digital Asset Classification Standard (DACS).

PancakeSwap (CAKE)

CAKE is the native cryptocurrency of PancakeSwap, the largest decentralized exchange for BEP20 tokens, which are digital assets that are compatible with the network for the Binance crypto exchange. The PancakeSwap platform enables a system that supplies the liquidity required to trade tokens on the BNB Smart Chain, an application-based blockchain that offers cheaper and faster transactions than the more widely used Ethereum network.

PancakeSwap’s trading system is designed to cut out intermediaries and order books. To that end, the platform incentivizes users to deposit funds into liquidity pools, which other users can trade against. This automated liquidation model is called an automated market maker (AMM).

CAKE Price

As part of its plans to enable a fully decentralized exchange ecosystem, PancakeSwap introduced CAKE as its native token in September 2020. After its release, the token, along with the broader crypto market, went on a bullish run, with CAKE's price reaching an all-time high of $44.18 in April 2021.

PancakeSwap incorporates an inflationary token model as there is no hard cap on the supply of CAKES. Instead, the protocol generates 1.2 million CAKE tokens daily (40 CAKE tokens per block of transactions added to the BNB Chain).

In light of the inflationary risks associated with the unlimited supply of CAKE, the team behind PancakeSwap has set up various deflationary systems to cancel out the emission rate of CAKE tokens. For one, some of the 40 CAKE tokens that are emitted daily are burned. Burning is an effective way of reducing the circulating supply of a digital asset. This is done by consistently transferring an amount of a digital asset to an irretrievable wallet. In the case of PancakeSwap, about 25.75 CAKE tokens are burned per block, and so the effective emission rate per block is about 14.25 CAKE.

Other deflationary mechanics adopted by PancakeSwap involve the burning of the following:

  • 0.05% of every trade executed on PancakeSwap.
  • 100% of CAKE sent to the developer’s address.
  • 100% of CAKE-denominated fees from the platform’s “initial farm offerings,” a service designed to help BNB Smart Chain developers raise capital for their projects.
  • 100% of CAKE spent to create profiles in the NFT marketplace and mint non-fungible tokens.
  • 100% of CAKE used to bid during “farm” auctions.
  • 20% of CAKE used to buy lottery tickets for a chance of winning a share of daily jackpots.
  • 45,000 CAKE per day (usually allocated to the lottery).
  • 3% of every prediction market round.
  • 2% of every earnings harvested in the auto CAKE pool.
  • 2% of every NFT sales used to buy CAKE for burning.

Notably, the sole purpose for implementing these deflationary mechanics is to prevent the devaluation of CAKE.

How does PancakeSwap work?

PancakeSwap uses an automated market maker that relies on the funds deposited into smart contracts, also known as liquidity pools. These funds are then automatically available for users to trade against. The biggest selling point of this model is that there is no need to involve intermediaries or an order-matching exchange infrastructure. Anyone can take up the role of a liquidity provider. In the same way, there are no know-your-customer restrictions on the trading section of the platform.

As for incentives, liquidity providers are rewarded with a share of the transaction fees paid by traders. The percentage allocated to each liquidity provider depends on his share of the total liquidity deposited in the pool.

Additionally, liquidity providers can take things up a notch by engaging in yield farming strategies. To do that, the investor must deposit a pair of BEP20 tokens in the appropriate pool and receive liquidity pool (LP) tokens, which represent the amount deposited by each liquidity provider in a pool. The liquidity provider can then stake those LP tokens in a farm in order to generate earnings denominated in CAKE.

CAKE anchors the incentive-based economy of PancakeSwap’s AMM as it unlocks several opportunities to generate earnings. More importantly, it also functions as the governance token of the PancakeSwap protocol. This governance utility, in particular, ensures that users can influence policy changes and developmental implementations.

The CAKE token earned from yield farming can be staked in PancakeSwap’s Syrup pools to generate additional interest. As such, this strategy combines three income-generating opportunities to attract liquidity providers and help them maximize profits.

Other services available on PancakeSwap are the lottery, the NFT marketplace and an initial farming offering, a service designed to help BNB Smart Chain developers raise liquidity for their projects and allow users to access the tokens of newly launched BNB decentralized applications.

At the core of PancakeSwap’s operations is an on-chain governance system anchored by CAKE. In essence, CAKE holders can partake in on-chain voting whenever there is a decision regarding the policies and future development of the protocol to be made.

Key events and management

PancakeSwap went live as an alternative to decentralized exchanges, like Uniswap and SushiSwap, native to the Ethereum ecosystem. The identities of the founders and the individuals who make up the development team of PancakeSwap remain unknown as they have opted for pseudonyms.

More specifically, the core developers and current members of the PancakeSwap team are popularly known as “chefs.” The founding team of PancakeSwap was led by Chef Hops who later stepped down as head chef in September 2021 to take an advisory role. The current head chef is Chef Snowball.

Like most established decentralized finance (DeFi) projects, PancakeSwap has had upgrades to expand the features of the protocol and resolve issues. With those upgrades, the developers were able to introduce auto-staking in Syrup Pool. Also, the trading fee was increased from 0.2% to 0.25%, with the added amount burned as part of the deflationary mechanics implemented on the platform.

In July 2021, an upgraded version of the platform’s lottery system called Lottery V2 was launched. This upgrade resolved some of the contract error issues of the original lottery system and reduced the price of a lottery ticket from 10 CAKE tokens to $5 worth of CAKE tokens.

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