Jun 4, 2021
What is PancakeSwap?
PancakeSwap is one of the famous DeFi based Protocol which aims to provide Automated Market Making (AMM) by being a #1 liquidity provider. This open-source DeFi based exchange is built on the Binance Smart Chain (BSC) through which the platform users can swap BEP-20 tokens.
CAKE is the native token of PancakeSwap and the users can swap, add liquidity, farm, yield, stake, and win CAKE Tokens through lottery.
PancakeSwap Exchange Specification
Type - DeFi Based Exchange
Native Token - CAKE Token
Blockchain Network - Binance Smart Chain (BSC)
Token supported for Swapping - BEP-20
Exchange Model - Automated Market Maker (AMM)
How Does PancakeSwap Work?
Automated Market Maker
An Automated Market Maker is a decentralized exchange protocol that doesnt need an order book but relies on the mathematical formula to set the price for the assets. The price of the assets is fixed according to the pricing algorithms. This pricing formula can vary according to the DEX protocols.As PancakeSwap works on the AMM model, which means the users can trade their digital assets on the platform at any time even if their order book isnt matched with anyone else.
Instead, the trading occurs against liquidity pools.
These liquidity pools are filled with users funds. The users deposit those funds into the pools just to receive a liquidity provider token or LP Token in return. These LP tokens can be used to reclaim shares and trading fees.So, in short, anyone can trade BEP-20 tokens or add liquidity to PancakeSwap and earn LP tokens as rewards.
These LP tokens are in several ways. For Example: if you add BUSD and BNB to the pool, you will receive BUSD-BNB LP tokens as rewards in return and For BETH and ETH deposits, you will get BETH-ETH LP tokens in return.
Is PancakeSwap Exchange Safe to use?
PancakeSwap is a DeFi based DEX exchange, whose smart contract is audited by Certik. Smart Contracts always hold their own risks and bugs. Even though audited properly, there may be any smart contract vulnerabilities at any time, which may result in bugs or errors in the platform which may cause asset loss.
Every platform has its own risks, thus deposit as much as you can afford in the platform PancakeSwap.
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