PancakeSwap is a decentralized exchange with no order books, bid/ask the system, or limit/market orders.
The platform automatically draws liquidity from one or more liquidity pools after buyers and sellers submit trades. These liquidity pools then rebalance after the trade is completed.
In this article, you’ll learn about PancakeSwap’s unique mechanisms for liquidity sharing and coin staking, why that means that the platform is truly decentralized, how it differs from other DEXs on the market, and what possibilities exist in its future.
How does Pancake Swap work?
The PancakeSwap platform comprises two parts: the blockchain (of which there are several different types) and the peer-to-peer exchange.
The blockchain manages trades by providing transparent, publicly verifiable transactions between users. This blockchain provides decentralized accounting to help resolve disputes, allowing for anonymity among traders while ensuring that no single user has complete control of the CAKE currency.
The peer-to-peer exchange links blockchain traders by looking for price differences on different blockchains, initiating an atomic swap, and then fulfilling each part of the transaction on either the Bitcoin or Komodo blockchain.
Pancake Atomic Swaps and Liquidity Pools
An atomic swap is a trustless method of exchanging one cryptocurrency for another. It allows traders to enter directly into a contract, which can operate without the need for an intermediary currency or exchange.
The liquidity pool provides automated market-making services to other decentralized exchanges (DEXs) by automatically exchanging CAKEs for other cryptocurrencies without requiring the traders to be on the Pancake Swap platform. These swaps are made possible through cross-chain atomic swaps facilitated by Komodo’s decentralized exchange (DEX).
Currently, liquidity sharing is handled manually, which means that users must not only track their assets but also manage them by splitting transactions.
This additional step makes liquidity sharing difficult and more time-intensive than it should be. The goal with Pancake Swap is to reach a point where pools are automated, meaning that they can share liquidity in real-time based on how many traders each pool has.
Who can use Pancake Swap?
Anyone can use Pancake Swap. Traders can begin trading by either opening an account directly through the peer-to-peer exchange or using their existing accounts on other exchanges to automatically populate their PancakeSwap profile.
If traders don’t already have a profile with Pancake Swap, they will need to create one before initiating an atomic swap. To do this, they must stake CAKE (the blockchain’s unique coin that is used to facilitate swaps) and fill out their profiles by verifying their email addresses and phone numbers.
What makes PancakeSwap special?
Pancake Swap is a truly decentralized exchange. Unlike other DEX’s with order books and bid/ask systems, PancakeSwap does not require traders to use an account or rank based on trade volume. Instead, everyone has access to the same level of liquidity.
In addition, there are no limit/market orders. As with all atomic swap DEXs, PancakeSwap uses transparent, publicly verifiable transactions managed by the blockchain.
Lastly, Pancake Swap sets itself apart from other decentralized exchanges because of its contract-based automated market makers (AMMs).
How to Buy Pancake Swap Coins (CAKE)
To purchase PancakesSwap Coin, users can perform a standard Bitcoin or Komodo exchange through the peer-to-peer exchange. For larger trades, it is recommended to utilize a verified atomic swap exchange. Exchanges like Bittrex, Poloniex, or Binance are excellent options for larger trades.
History of Pancake Swap(CAKE) and the team behind the project
Pancake Swap was created as a backup plan for the SuperNET decentralized exchange, no longer operational. The goal was to create an atomic swap-powered peer-to-peer decentralized exchange that would not require traders to trust any single party or centralized platform.
The team behind PancakeSwap has been working with Komodo since Oct. 2016, helping to build decentralized tools and applications on their ecosystem. Because of this longstanding relationship, Pancake Swap will initially only support trading between Komodo’s native coin (KMD) and BTC or LTC.
Pancake Swap is extending Komodo’s platform intending to allow developers to create digital goods more quickly. This is a positive development for Komodo, as Pancake Swap is building on top of their already successful technology. The liquidity pool helps not only traders but all decentralized exchanges. This would help everyone just by being there and trading with other people that are using different DEXs.
We believe this will have great success as long as they can tie their own blockchain in with oracle connections for real-world use cases. As well as try not to fall into the same hole that other DEXs have when it comes to liquidity!
Pancake Swap(CAKE) FAQs
Is CAKE a good coin?
Blockchain projects that are building on Komodo have been very successful so far. In the case of Pancake Swap, it will be a great tool for decentralizing liquidity and connecting decentralized exchanges on the blockchain.
Is CAKE an ER20 token?
CAKE is an ERC20 token and can be traded on some standard exchanges. However, Pancake Swap does not use a smart contract or Ethereum blockchain to manage trades. All trades are managed through atomic swaps that are built into the Komodo blockchain.
What are Pancake Swap’s technology goals?
Pancake Swap is building atomic-swap-powered decentralized peer-to-peer exchanges that will allow people to trade directly with one another without placing trust in a centralized platform.
Can I use my hardware wallet with Pancake Swap?
At this time, we recommend using a software wallet like Coinami to manage your CAKE tokens. However, if you want to use your Ledger or Ethereum address as a receiving address, you will need to use Electrum-Komodo.
What is the difference between Pancake Swap and Komodo?
Pancake Swap and Komodo share the same technology stack and development team (Decentralized Anonymous Currencies). However, Pancake Swap focuses on decentralized peer-to-peer trading, and the Komodo platform is focused on decentralized ICOs.
What’s Coin Staking?
Coin staking is the process of holding coins and earning rewards for keeping them in your wallet. Different coins require different amounts of time to stake, but typically you can expect to earn between 1–14% annually on the number of coins that you stake.