Wednesday, October 4, 2023

Is PancakeSwap Worth Investing?


“This unique DeFI token has returned 1,600% in a year.” (The Motley Fool)

Major Aspects

This month marks the first anniversary of PancakeSwap (CRYPTO:CAKE). The Binance Smart Chain’s largest automated crypto market maker (provider of trading liquidity) (BSC). PancakeSwap users’ stakes (held their crypto in digital wallets) over $5.6 billion, compared to a market value of $4.983 billion. Uniswap, for example, has a total value locked (TVL) 3.3 times its market size.

PancakeSwap, unlike many other cryptocurrencies, is much more than just purchasing and keeping tokens. Let’s take a look at why it’s such a popular option among coin collectors.


PancakeSwap is based on Binance Chain BEP-2, the world’s largest cryptocurrency exchange by daily volume ($27 billion). Ex-Binance employees founded it. Certification authority CertiK has also audited the protocol. As with audited financial statements of publicly traded companies, auditors may trust more than unaudited DeFi projects.

When it comes to investing in CAKE, there are three paths to profit.

First, holders can buy BEP-2 CAKE tokens directly from exchanges and store them in their wallets to earn.

The utilization of its Binance Smart Chain CAKE tokens, or BEP-20, is the key attraction. Using a digital wallet like TrustWallet, users easily switch between BEP-2 and BEP-20 CAKE. The only difference is that BEP-20 CAKE supports smart contracts, which are self-executing agreements that activate when specific criteria are satisfied.

The second layer of returns is now visible. A user may link their wallet to PancakeSwap. Stake BEP-20 CAKE to earn more than 60% each year in incentives.

This derives from:

  1. Fees paid to PancakeSwap by other blockchain developers to list or publicize their tokens.
  3. Validation fees for CAKE transactions
  4. The introduction of new CAKE to encourage adoption.

After other CAKE-affiliated blockchain developers get enough traction to stop offering marketing awards, yields will drop. A total of 221.8 million tokens are now in circulation. As a result, supply increases rapidly (though still above staking yields). Assume an 80% interest rate on US dollar deposits and a 50% inflation rate. It would be a fraction of the nominal rate.

To become a market maker on the PancakeSwap DEX, users can commit CAKE to offer liquidity for crypto-to-crypto trading.

The larger the spread between the bid and ask prices, the lesser the trading volume for that asset. Pancake presently has 1,647 currencies and 9,152 trading pairs, significantly greater than competitors.

Finally, PancakeSwap’s smart contracts enable automated restaking, allowing users to return CAKE to the staking pool and earn more “interest.” Bond investors can receive compounding returns by reinvesting their coupon payments into the underlying debt, just as they can do with dividend payments. This method of re-staking CAKE can result in yields of up to 83 percent instead of the usual 65 percent.

The Judgement

During bull runs, CAKE holders can earn compound profits, but they aren’t exposed to compound sell-offs. Investors might, however, lose their CAKE principal in the worst-case scenario.

However, with such high yields, there is a margin of safety since the passive income generated by staking may compensate for short-term market reversals. As a result, it’s a good coin to look into.

Louis Honsa
Louis Honsa
Louis Honsa is an independent writer for Cryptoconstellation. He is a data analyst and trades NFT’s too. Louis enjoys cycling and working out in his free time.

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