How does Pancakeswap work? Many people want to use decentralized exchanges, but you don’t know about their mechanism. In this article on the Shetcoiner website, we want to talk to you about How pancakeswap works; So stay with us until the end of this article.
What is PancakeSwap?
The most popular decentralized exchange (DEX) on the Binance smart chain is PancakeSwap which in recent months has become somewhat of the best structure in the blockchain space due to its high liquidity, extensive feature and very easy to use. The platform is designed to allow users to securely trade Binance Coin or BNB and a wide variety of BEP-20 tokens without relying on centralized services or losing control over their private keys. As a decentralized exchange, all transactions on PancakeSwap are done automatically through smart contracts which completely eliminates the risks of trading with a single person.
One thing to note is that the team behind PancakeSwap is completely anonymous, and the platform has been reviewed by several leading blockchain security companies, including Certik and Slowmist. The platform is also completely open source; This means that the PancakeSwap website and smart contract code are open for public review.
Since its launch in September 2020, the platform has seen significant growth not only in the number of users and liquidity of supported assets, but also in the variety of features it offers. Currently, PancakeSwap can be considered an entire ecosystem of DeFi tools, all built around the core tool token of the CAKE platform.
What is a cake?
CAKE a utility token in PancakeSwap, is used for various purposes in this reputable exchange, Its main functions are: farming, sharing, participating in the PancakeSwap lottery and creating and voting on government proposals through the platform’s social management structure. Next, we want to check how this exchange works.
How pancakeswap works?
PancakeSwap is a type of DEX that activity is recognized automatically; This essentially means that there is no order, bid system, or market limit order. Instead, users transacting on the platform automatically draw liquidity from one or more liquidity pools and rebalance once the transaction is completed. Trades made in an AMM, such as a PancakeSwap, subtract liquidity from one side of the pool and add liquidity to the other; As a result, the assets in that pool and their relative value change.
This liquidity is provided by users known as liquidity providers who add equal amounts from both sides of a liquidity pool for example: BNB/USDC to increase the total available liquidity. Users receive tokens that represent their contribution to that particular pool. These tokens must be returned to be retrieved from the pool for providing liquidity, providers receive a share of the transaction fees generated by each pool they participate in. There is a fee of 0.25% for makers and receivers most of which is shared between liquidity providers.
As a decentralized DApp, PancakeSwap is generally supported through a wallet; Such as: MetaMask, TrustWallet, or WalletConnect. Once these wallets are configured to support the Binance Smart Chain, they are used to interact with PancakeSwap smart contracts via the intuitive PancakeSwap.
The platform is funded by the PancakeSwap treasury which currently charges 15% of all transaction fees generated. According to the official documents, the funds from the treasury can be used for various purposes related to the maintenance of the platform and these include salaries, prizes, hosting, etc.
Conclusion
In this article on the Shetcoiner website, we have reviewed this exchange and introduced its different parts. We also talked about How pancakeswap works and its token and mentioned how you can use this exchange. This exchange is a decentralized structure and this can be known as a positive or negative feature; So be sure to keep your assets safe.
