What is Pancakeswap and How to use it? 2 pancake swap pancake swap |

What is Pancakeswap and How to use it?

Decentralized financiers have a soft spot for food. Pancakeswap, Sushiswap…the list goes on. These food-themed protocols/products have revolutionized crypto exchanges.

Pancakeswap is another decentralized exchange built on the Binance Smart Chain, a fast and cheaper alternative to Ethereum.

This concept was initiated by Ethereum, the world’s second-largest cryptocurrency project by market capitalization in 2018, by introducing Uniswap, a Defi liquidity protocol constructed on Ethereum.

It is compatible with all ERC-20 tokens, and you can easily integrate it with wallets such as MetaMask and MyEtherWallet.

What is Pancakeswap?


Similar to Uniswap, Pancakeswap is a decentralized exchange for swapping BEP-20 tokens.

Importance of Decentralization

Now, why do we give such importance to the word ”Decentralized”?

Whenever you trade equity, crypto, commodity, one needs to remember that there are always two parties involved.

Without a seller, a buyer cannot initiate his buy, and without a buyer, a seller cannot initiate his sell. Thus, if you want to sell $10,000 of BTC, you have to wait for someone looking to buy an equal or higher amount of BTC at that price.

Within a centralized system, Liquidity plays a crucial role. It refers to the market depth or the number of orders prevailing on an order book at any given point in time.

Why is Liquidity so important?

Imagine you are selling momos on the street. Before the novel virus graced our lives with its presence, the streets were busy and hustling.

The business was doing well, and thus the momos’ market was liquid. However, after the pandemic hit us and mainly impacted the market, buying and selling reduced considerably. Therefore, we entered into a narrow market.

These are the general issues tackled skillfully by decentralized systems.

How Pancakeswap works?

Pancake swap allows users to exchange crypto assets by tapping into user-generated liquidity pools. To build these liquidity pools, Pswap offers a range of DeFi farming opportunities for liquidity providers.

It uses AMM (Automated market maker), which implies that you trade against a liquidity pool and not against an order book where you are matched with someone else.

After depositing funds in these pools, users receive tokens in return which users can use to reclaim their share plus a portion of trading fees.

In simple terms – add Liquidity, trade BEP-20 tokens, or earn rewards.

Once you have deposited your LP tokens, you are essentially locking them up so that you can earn rewards in the form of CAKE.

A large number of LP tokens are supported by Binance such as BUSD, BETH, USDT, CAKE, DAI, LINK… the list goes on.

In turn, you can stake your CAKE to earn more rewards.

Here’s a list of steps to help you with it:

  • Deposit some funds
  • Receive LP tokens
  • Use these tokens to farm CAKE
  • Stake your CAKE in Syrup pools
  • Earn additional rewards.


How to use Pancakeswap?

First and foremost, you need to set up your wallet by navigating to the Pancakeswap homepage. As mentioned above, BSC caters to a wide range of wallets, including Ethereum wallets such as MetaMask. Binance provides a complete guide to set up a wallet of your choice.

Once that is off the table, you can unlock your wallet to reveal additional information. You will notice that different tokens correspond to different rewards.

Now how does that happen?


You know the drill. To farm CAKE, you first need to add some liquidity.

  1. Navigate to the left of the sidebar and click on Liquidity.
  2. Hit on add liquidity and select the token pair that best suits you.

Warning – make sure you have equipped yourself with the pros and cons of impermanent loss before adding funds.


For the ERC-20 tokens, you need the contract to approve them on your behalf. When you click on Approve Contract, a popup will ask you to confirm the transaction and display a fee.

  1. Go to the Farming tab and select the option that matches your LP token.
  2. Enter the amount you want to stake and confirm.
  3. If you want to harvest your rewards at any point .e liquidate your profits, click on Harvest and confirm the transaction.


  1. Navigate to the pools tab, and a list of pools will be presented where you can stake your CAKE.
  2. Once again, approve the withdrawal of your tokens. Enter the amount of CAKE you want to stake.

Once the CAKE is staked, you will earn your rewards passively. If you wish to cash it out, hit on Harvest.

Farming, Staking, Liquidity are the most approved ways to use PancakeSwap. However, other means such as Lottery, NFTs are also available.

A note of Caution

Investors should always deposit funds keeping in mind the Thumb Rule – Never deposit more than you can lose.

Online platforms are always susceptible to technical glitches, bugs, and errors even though they form the base of audited, reputable projects.


Binance has revealed that as of April 2021, it has executed around 4.9 million transactions in a single day, triple the amount Ethereum has managed.

Ethereum may have been the flagbearer of the Defi trend, but projects such as PancakeSwap have paved the way for innovation and growth

I hope this article helps you and if you have any queries related to it, leave your comment below. If you have not joined our community then you can now. We are very active there and have been sharing important information there.

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