PancakeSwap is a financial protocol, completely decentralized, used to exchange cryptocurrencies. A currency exchange is called a "swap". Currently, the average weekly trading volume of PancakeSwap is $4 billion. Investors have used PancakeSwap because of its usefulness in decentralized finance (DeFi).
You may know Uniswap, the swap tool for decentralized finance on Ethereum. PancakeSwap is its counterpart on the Binance blockchain. Indeed, decentralized finance is today driven by two blockchains supporting decentralized exchanges. On one side you have the Ethereum blockchain and its ERC-20 protocol allowing the creation of tokens on its chain. But the network is congested and transaction fees have become very important. On the other side, Binance has released the equivalent of the ERC-20 protocol: the Binance Smart Chain, which uses the BNB as a governance currency and the BEP-20 protocol for token creation.
Operation ⚙️
PancakeSwap is a set of computer programs that run on the Binance Smart Chain and allow tokens to be exchanged in a decentralized way. Decentralized here means that it works without any authority. This service is self-powered by its users. PancakeSwap should be visualized as an entity where lenders place cryptocurrency liquidity on the platform, so that other users can come and make their exchanges.
Individuals and bots; called "liquidity providers"; deposit liquidity to the exchange by adding a pair of tokens to a smart contract that can be bought and sold by other users. In return, the liquidity providers receive a percentage of the trading fees earned for that pair of tokens. For each trade, a certain number of tokens are removed from the pool for an amount of the other token, thus changing the price. No fee is required to list the tokens, which allows access to a large amount of Ethereum tokens. In addition, no registration is required for users.
Traders can trade Binance Smart Chain tokens on PancakeSwap without having to trust anyone with their funds. Meanwhile, anyone can lend their cryptocurrency to reserves called liquidity pools. In exchange for contributing money to these pools, they receive commissions.
It's a win-win situation for everyone.
If you're looking for BCS-based tokens, you'll definitely find them on PancakeSwap. If you want to make liquidity available, you will be paid to feed a "pool" on the service.
Use 📱
Connection 🔐
Using PancakeSwap is very simple. Just go to pancakeswap.finance. Then connect your Binance Smart Chain wallet with MetaMask for example. You can also use TrustWallet's Wallet Connect or Binance Wallet depending on your preferences. Sign the certificate and your wallet is ready for use on PancakeSwap.
⚠️ If you are using PancakeSwap with MetaMask, you will need to set up the Binance Smart Chain beforehand. Tutorial here.
Choice of the pair 💵/💶
On this step you will have to choose which currencies you want to exchange.
In this example, we deposit NBBs against Neurchi. Initially, you can deposit a "base". Here, it will be BNBs, which is the governance currency of the blockchain. Then exchange them for any BSC token (BEP-20) already present in a liquidity pool. In case you want to sell a token against another one, just use the same process by reversing the values.
Anyone can add a token on PancakeSwap. It is very important to check the address of the tokens you swap.
Confirmation ✅
A summary of the service charges will appear. Confirm the swap, then validate the transaction. A window opens to sign the Smart Contract. Check that you have enough funds to cover the BSC network fees, which are nevertheless very low compared to the Ethereum network. Wait a few seconds and it's done, you have exchanged BNB for Neurchi Token (exemple).
The "slippage tolerance" is the difference between the expected price of a transaction and the price at which it is executed. This is the difference you are willing to pay if the price of the currency changes while your transaction is being processed. On very volatile currencies, it can be interesting to select a slippage rate of 5% or more.
Adding liquidity 💰
To add a crypto, which you own or have created, you need to go to the "Liquidity" tab and then the "+ Add" button. Then import the equivalent of your token in BNB to create the pool and allow users to trade the newly listed liquidity. Depending on the price of the token, you will need to contribute for example 1BNB for 200,000,000 NEURCHI tokens. Note that the difference will be automatically calculated by the service.
In case users swap the crypto you have deposited, you will be compensated according to the fees charged on the transactions that took place thanks to your token contribution.
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