As of recently, Binance Smart Chain’s elusive PancakeSwap became quite popular among DeFi investors, reaching a level where it competes against traditional DEX options like Uniswap and SushiSwap. Did PancakeSwap rightfully earn its fame and if so, how?

Not an avid reader? That’s fine. You can also learn about PancakeSwap in video format!

PancakeSwap is a decentralized exchange on Binance Smart Chain, one of Ethereum's top competitors.

Interestingly enough, the Binance Smart Chain blockchain is the creation of Binance, a centralized crypto exchange known for being the largest in the world. With PancakeSwap, Binance is essentially competing against two distinct cryptocurrency establishments — Ethereum and Uniswap.

The intrigue gets even deeper because PancakeSwap can outshine Binance itself if exchange volume gets deep enough. However, cryptocurrency narratives aside, PancakeSwap is one of today's largest DeFi protocols, and one that needs explaining if you're new.

This guide to PancakeSwap will teach you the basics of how the decentralized exchange and liquidity protocol work, along with how to use each to your advantage.

After all, there are enough differences when you compare Uniswap to PancakeSwap that it's well worth understanding PancakeSwap's features.

What is PancakeSwap? It's more than just another food-themed DeFi protocol

PancakeSwap is a decentralized exchange built on Binance Smart Chain, a fast and inexpensive alternative to Ethereum.

Much like the celebrated Uniswap DeFi AMM protocol running on Ethereum, PancakeSwap enables users to swap between cryptocurrency assets by tapping into user-generated liquidity pools.

To create said liquidity pools, PancakeSwap offers a plethora of DeFi farming opportunities for liquidity providers. The liquidity grab has so far worked like a charm — well over $1 billion in total value locked (TVL) has migrated to PancakeSwap since it opened its doors.

However, unlike Uniswap, PancakeSwap rewards those who stake its native BEP-20 token called CAKE. When you stake CAKE, you get SYRUP at a 1:1 ratio. Holding SYRUP entitles you to 25% of the CAKE emissions distributed proportionally to holders.

PancakeSwap vs. Uniswap vs. SushiSwap

In today's cryptocurrency landscape, there are three major decentralized exchanges ruling the roost.

Uniswap — The original DeFi liquidity protocol built on Ethereum. Today's standard for easy cryptocurrency trading using ERC-20 tokens and mostly ETH pairs.
SushiSwap — A community-governed Uniswap fork that has evolved into a DeFi hub offering token swaps, farming, and crypto lending/borrowing.
PancakeSwap — Uniswap clone built on BSC to deliver fast and inexpensive trades using BEP-20 tokens and the BSC←→ETH bridge.

While all three enable decentralized exchange, community governance, yield farming, and LP (liquidity provider) opportunities, only Sushi and PancakeSwap pay rewards back to token holders who stake their tokens.

Cheaper + faster transactions

Additionally, PancakeSwap is less expensive and faster to use than both Uniswap and Sushi. The reason is PancakeSwap is built on Binance Smart Chain, a high-throughput blockchain built by Binance to compete with Ethereum.

BSC achieves its scaling prowess in part by being less decentralized than Ethereum, but that doesn't seem to deter users from taking advantage of its barely-there transaction fees. Trading on PancakeSwap is undeniably better for smaller wallets who can't quite call themselves crypto whales and don't have unlimited funds to drop on gas fees.

Accessing PancakeSwap is still familiar for Ethereum users since you can connect to the exchange using Metamask, just like you do when using Uniswap and SushiSwap.

Initial farm offering (IFO)

PancakeSwap is spearheading a new ICO model called the IFO, short for Initial Farm Offering.

An IFO enables CAKE-BNB liquidity providers to buy a new project's tokens. Joining an IFO is straightforward if you're already a CAKE-BNB liquidity provider — just deposit your LP tokens on the IFO page.

If you want to participate in an IFO but don't have CAKE-BNB LP tokens yet, you'll need to get some first. Buy BNB and CAKE tokens equal to the total amount you want to contribute (decide total contribution amount, then buy 50% BNB and 50% CAKE). Then, deposit those tokens in the CAKE-BNB liquidity pool to receive your LP tokens.

Now, head back to the IFO page, deposit your LP tokens, then when the IFO is finished, you'll receive the project's tokens in exchange.