Pancakeswap, a decentralized exchange (DEX) built on Binance Smart Chain become the second-largest DEX service in the world in terms of trading volume According to market service provider CoinGecko, Pancakeswap had a trading volume of $400 million yesterday.
Pancakeswap started as an imitation of SushiSwap
Pancakeswap was originally a pale imitation of SushiSwap, the (now) third-largest decentralized exchange based on Ethereum. The project has since witnessed massive growth, with various cryptocurrencies worth more than $1.7 billion included in DEX.
The use case of Pancakeswap is simple: the user provides the platform with liquidity (in return, receives FLIP tokens) and provides the SYRUP management token to the platform.
This agreement is similar to many of the peer-to-peer exchanges that suddenly popped up in 2020 and offers users who become liquidity providers huge “profits” and the ability to manage the platform. However, new products such as lottery services and non-fungible token (NFT) art platforms have further promoted the use case of pancakeswap.
To date there are already 176 markets on Pancakeswap. Packaged BNB is a token issued by the Binance cryptocurrency exchange. It is the market with the largest trading volume, trading in excess of $81 million last day. CAKE was followed by a transaction volume of $45 million, followed by “Birthday Cake”, “Burger Swap” and “Monster Slayer Cash” as well as other memetic tokens, each with a much lower transaction volume.
Pancakeswap’s high-yielding farms are still attracting users. As shown in the figure below, ZEE/BNB’s liquidity pool (ZEE is the token of the multi-chain DEX aggregator ZeroSwap) pays users more than 1,300% of sales every year.
PancakeSwap Benefits from Binance Smart Chain (BSC) Qualities
Since the transaction volume is not fake, the success of Pancakeswap is largely due to the anonymous team choosing the Binance Smart Chain (BSC), a public blockchain created and managed by the Binance cryptocurrency exchange.
Changpeng Zhao, CEO of Binance, stated that the BSC network only charges a few cents per transaction. This is a so-called “high speed” blockchain that delivers approximately 300 transactions per second. This is in stark contrast to Ethereum’s enormous transaction fees (at extreme levels they can reach $100 or even more than $1,000) and the much slower speed (around 15 transactions per second). However, the degree of decentralization of BSC is much lower, which means that any “decentralized” exchange built on it has a similar security level, which represents a potential risk.
The lower fees open up Pancakeswap to more users who might want to trade a small transaction (e.g. $100) without paying at least 25% of the transaction fee.
The data prove it. Pancakeswap’s local token, CAKE, has a market value of $792 million today, and the price of each token is $6.97. On the past day, more than $76 million in tokens changed hands and CAKE tokens were “burned.”