Pancake Swap is one of the decentralized cryptocurrency exchanges powered by the Binance Smart Chain (BSC) blockchain. Here, you can swap cake to bnb, cash out cake and bnb tokens and make other multiple transactions. It has almost the same structure and principle of work as Uniswap, Sushiswap and other cryptocurrency exchange stations. So, if you are familiar with their interfaces, you will not face any problems with understanding the principles of Pancake Swap running. Essentially, their technologies are similar.
How does Pancake Swap work?
Pancake Swap exchange uses quite a simple model of an automated market maker (AMM). It means that during the process of the digital assets trading there is no order book on this platform. Hence, you will not be compared with other traders. Instead, you make a deal with an algorithm that manages the pool of liquidity and takes into account all transactions taking place within the exchange at the time of your exchange. To complete a transaction, you do not need a seller who wants to give you a token at a suitable price, but you should have the token you need in the right amount in the exchange liquidity pool. These pools are filled out with the users’ funds. Users deposit their funds to the liquidity pool and get some tokens in return from the liquidity provider (LP). These tokens can be used to return your share and receive a part of trading commissions. On this platform, you can trade your tokens or add liquidity and get some remuneration.
What are the types of LP tokens?
There are several types of LP tokens. When you add to the pool BUSD and BNB, then you will get in return BUSD-BNB LP tokens. When you add BETH and ETH to the liquid pool, then you get in return BETH-ETH LP tokens.
What is more, the Pancake Swap platform has created its own CAKE token, which is used to manage the project and reward project participants.
To use PancakeSwap, you need to attach a wallet to it. We recommend using MetaMask, it is convenient to install it as a plugin on Google Chrome or on a mobile phone.
By connecting the wallet to the exchange, you can use all its functions anonymously.
- exchange of tokens in 250 pairs
- buying NFT collections
- participation in the CAKE lottery
- farming and staking
How to get passive income?
You can easily get a passive income from pharming by investing your tokens in the PancakeSwap exchange liquidity pool.
In order to get started you need:
- Connect a wallet, for example MetaMask
- Go to Trade – Liquidity section
- Add tokens available to you to the liquidity pool
- Get LP for using tokens when exchanging on the exchange
- Go to the Farms section and select the section corresponding to the received LP
- Confirm LP transfer for staking
- Get CAKE and sell it on an exchange convenient for you
- You can leave the received CAKE tokens on your PancakeSwap account and invest them in the Pools section to get even more tokens.
Along with other online crypto exchange platforms Pancake Swap, gives you a possibility to access tokens that are not available on centralized exchanges, pay less commission when exchanging them. You can also receive passive income by investing your tokens in the exchange liquidity pool.