PancakeSwap is a decentralized exchange used by Binance Smart Chain tokens. While less popular than other exchanges, its CAKE token has done incredibly well.
Apr. 2 2021, Published 11:43 a.m. ET
Decentralized exchanges have become some of the most popular blockchain projects on the market. While centralized exchanges like Coinbase and Binance are still more popular among mainstream investors, a growing number of crypto enthusiasts are ditching these institutional middlemen. Instead, they’re looking at alternative ways to buy and sell crypto, which is where decentralized exchanges come in.
PancakeSwap might sound like a goofy name for an exchange, but it quickly formed a dedicated fan base. Its signature cryptocurrency, CAKE token, has become one of the most popular coins on the market right now. While it might not be as large and popular as UniSwap, PancakeSwap has managed to become one of the best-performing blockchain projects on the market.
PancakeSwap is a decentralized exchange that launched in October 2020. Like other decentralized exchanges, no middlemen interfere in the transaction process. Instead, buyers and sellers are matched together directly. This also means that you don’t need to set up an account or go through an approval process (also known as Know-Your-Customer protocols). Instead, you can directly link your digital wallet to PancakeSwap and you’re good to go.
Unlike other exchanges, like UniSwap or SushiSwap, PancakeSwap is built on the Binance Smart Chain. While Ethereum is much larger and more popular, with a larger selection of altcoins, there are reasons why Binance Smart Chain tokens are becoming more popular.
The biggest reason is that they cost much less and are able to process significantly more transactions. If you go on Uniswap right now, you could end up paying $50–$100 in gas fees due to the sheer volume of transactions being processed. Since PancakeSwap only trades Binance Smart Chain tokens, the fees are much lower, which is why some projects are migrating to this alternative blockchain.
While that means there’s less competition among other decentralized exchanges, working with only Binance Smart Chain tokens means that there are fewer coins available for trading. However, it isn’t hard for an Ethereum token to be transferred onto the Binance Smart Chain from a developer’s point of view. Therefore, PancakeSwap will become more popular as more Binance Smart Chain tokens are created.
The prices for CAKE tokens have shot up by more than 30x over the past month and a half, which makes it one of the fastest-growing cryptocurrencies on the market right now. Not only do CAKE tokens let you vote on various changes to the platform, but they also entitle you to a small share of the transaction fees on the network. The more CAKE tokens you own and hold, the more you’ll receive in these payments—similar to a dividend on a stock.
While PancakeSwap isn’t as popular as other Ethereum-based decentralized exchanges, it’s still growing incredibly quickly. Expect prices to continue soaring well into the $40–$50 range by the end of the year.
Like other decentralized exchanges, you can’t find PancakeSwap on websites like Coinbase or eToro. Their selection of altcoins remains limited. Your best bet would be to go through Binance, although a few other small platforms offer CAKE tokens as well. You’ll also need to have a digital wallet to store CAKE.
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