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What is PancakeSwap? Can it become the leading decentralised exchange?

By Ankish Jain

Edited by Vanessa Kintu

11:00, 17 December 2022

Pancakeswap logo.Cryptocurrency decentralized exchange DEX, tablet.Trading blockchain platform to swap,buy,sell crypto token,digital coin
PancakeSwap is a DEX based on the BNB Chain. Photo: Ira Lichi / Shutterstock

PancakeSwap (CAKE) is a leading decentralised exchange (DEX) that soared in popularity in 2021, reaching an all-time high of $44.18 on 30 April 2021.

However, owing to the bearish circumstances created by the Terra-UST collapse, CAKE declined to a 52-week low of $2.51 on 18 June. As of 15 December, CAKE was trading at $3.69, down almost 92% from its peak price.

CAKE live price chart

CoinMarketCap’s statistics further suggested that PanCakeSwap was the seventh-biggest DEX in terms of trade volume and market share. It competes with other well-established DEXs such as dYdX (DYDX), Uniswap (UNI), and others.

What is PancakeSwap, and does it have a future in the face of such fragile macroeconomic conditions and a highly competitive market? Let’s find out.

What is PanCakeSwap and how does it work?

PancakeSwap is a DEX based on the BNB Chain (formerly Binance Smart Chain) rather than Ethereum (ETH). It allows users to swap BEP-20 standard tokens effortlessly. BEP20 is a token standard used for producing tokens on BNB, similar to ERC20 for creating tokens on Ethereum.

DEXs employ smart contracts to enable users to trade directly with each other, rather than depending on a centralised platform. Their assets are stored in non-custodial wallets, boosting security.

Historically, most DEXs employed order books – databases that track all open buy and sell orders made on an exchange. While many DEXs continue to employ order books, automated market maker (AMM) DEXs have become increasingly popular on account of their ease of use and greater liquidity.

How does PanCakeSwap work? To facilitate crypto transactions, AMM-based PanCakeSwap depends on user-fuelled liquidity pools. Instead of dealing with an order book and trying to locate someone who wants to trade a user’s tokens, AMMs let users lock their tokens into a liquidity pool. This allows users to make the desired exchange, while those that retain their funds in the pool gain rewards.

PanCakeSwap’s native utility and governance token is CAKE. What is PancakeSwap coin used for? The primary objective of the token is to incentivise liquidity supply to the PancakeSwap platform. 

Users may receive incentives by depositing and locking up Liquidity Provider (LP) tokens. The obtained LP token rewards can be farmed on the PancakeSwap platform, which allows users to accumulate CAKE.

PancakeSwap also features game-like activities, such as betting on whether the price of the BNB coin will rise or fall within a specific time frame.

It also features a lottery component, where users can buy a ticket to win a large amount of CAKE. The DEX also sells a variety of bunny-themed collectable non-fungible tokens (NFTs). And there are initial farm offering (IFO) sales, which let users purchase fresh new coins from nascent projects.

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PancakeSwap coin price history

CAKE all-time historical performance

The PancakeSwap cryptocurrency was launched in September 2020. It has given a return on investment (ROI) of 245.75%, according to CoinMarketCap.

Based on the PancakeSwap coin price history from 2020, the CAKE coin price declined from $1.37 on 29 September to $0.41 on 2 October, a loss of 70% within days of its launch. It closed the year at $0.60.

During the beginning of 2021, CAKE’s price action turned extremely bullish amid favourable market conditions and mainstream acceptance of cryptocurrencies. As a result, the PancakeSwap cryptocurrency spiked from $0.62, reaching an all-time high price of $44.18 on 30 April, an increase of 7,025%.

However, market sentiment turned bearish in May 2021 when Elon Musk tweeted about discontinuing Bitcoin payments for Tesla cars and the Chinese government heightened its cryptocurrency crackdown.

DOGE/USD

0.12 Price
-7.280% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

BTC/USD

64,676.00 Price
-2.150% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

SOL/USD

169.07 Price
-7.230% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.2652

XRP/USD

0.61 Price
-4.720% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

As a result, the CAKE coin price declined to $12.72 on 24 May and bottomed at $12.03 on 20 July. Market sentiment then turned slightly bullish. The CAKE token price reached $26.13 on 28 August. However, the rally didn’t sustain. The price declined to $10.93 on 14 December. It closed the year at $12.03.

Since the onset of 2022, the crypto market climate has been bearish amid the failures of top crypto projects, rising inflation, the Russia-Ukraine war and fear of recession. As a result, CAKE token price declined to a 52-week low of $2.51 on 18 June.

As of 15 December, CAKE was trading at $3.70 and had a market capitalisation of $584m, making it the 64th largest crypto by market size.

PanCakeSwap (CAKE) news and price drivers

PanCakeSwap has undergone several crucial milestones, which may affect its price in the coming days. Here is a quick recap of the most crucial pieces:

Launch of Aptos PanCake bridge

PanCakeSwap announced the Aptos-PanCake bridge in December 2022 to easily connect CAKE tokens to Aptos, a layer-one blockchain created by Aptos Labs.

Due to this bridge, CAKE has become a multichain token between BNB Chain and Aptos. Aptos PancakeBridge allows users to bridge their CAKE at a 1:1 ratio across these two blockchains, allowing them to explore a broad and exciting new ecosystem.

PanCakeSwap burn event

PanCakeSwap revealed the results of the round of CAKE burning in December 2022. According to the official tweet, 6.95 million tokens worth around £26m were burnt.

The destroyed CAKE tokens represent 4.4% of the circulating quantity of 158.28 million tokens, according to CoinMarketCap statistics. Furthermore, the overall supply of CAKE (350 million) is more than half of the token's maximum supply (750 million), indicating widespread token burning.

The purpose of token burning is to lower cryptocurrency's total supply, thereby inducing demand. If demand is high and supply is limited, the price will increase.

The bottom line

While the early phase of PancakeSwap was not well-received by users, it required time for CAKE to establish that confidence and demonstrate the strength of its AMM-based DEX foundation.

Meanwhile, unstable market conditions have eroded investor confidence in crypto-assets, as seen by the CAKE token's price movement and trading volume statistics.

The volume of transactions, the number of users and price fluctuations in the cryptocurrency market will help determine the future price of PancakeSwap (CAKE). 

While knowing key metrics about CAKE is important for accessing the project’s health, it shouldn’t be a substitute for your own research. 

You should always conduct your own due diligence before trading, looking at the latest news, technical analysis and fundamental analysis, while also considering the opinions of a wide range of analysts before making any trading decision. 

Keep in mind that past performance is no guarantee of future returns. And never trade or invest money that you cannot afford to lose.

FAQs

How many PancakeSwap coins are there?

As of 15 December, CAKE coin has a current circulating supply of 158.27 million tokens and a maximum supply of 750 million tokens.

Is PancakeSwap secure?

PancakeSwap is an open-source application that has undergone many security assessments by Certik, Peckshield, and SlowMist. In addition, it employs multi-signature for all smart contracts, enhancing security.

What makes Pancake Swap unique?

PanCakeSwap uses an automated market maker (AMM) to enable token exchanges without an order book. It also offers a variety of passive income-generating activities, such as yield farming and lottery tickets.

Markets in this article

CAKE/USD
CAKE/USD
1.9475 USD
-0.0923 -4.660%
BNB/USD
Binance Coin / USD
572.14 USD
-16.51 -2.840%
DYDX/USD
DYDX/USD
1.3163 USD
-0.0677 -5.130%
ETH/USD
Ethereum / USD
3115.97 USD
-266.41 -7.890%
UNI/USD
Uniswap / USD
7.18364 USD
-0.41633 -5.530%

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