Crypto Academy / Season 3 / Week 3 - Homework Post for professor@yousafharoonkhan
Introduction
Pancakeswap is an exchange that runs on a decentralized model, used for swapping of BEP-20 token, it was built on Binance smart chain utilizing the automated market maker protocol to provide and manage liquidity on the platform.
The decentralized exchange allows its users to perform transactions without interference of a third party, allowing Users full access control of their assets and activities on the platform. Users of decentralized exchanges directly transact with the liquidity pool on the platform provided by the liquidity providers' deposited tokens.
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Liquidity on pancakeswap
Liquidity on pancakeswap refers to shares of token deposited by investors (Liquidity providers) to the liquidity pool that enables other users to perform transactions, pancakeswap rely on the automated market maker (AMM) provided by liquidity providers to generate liquidity, thus limiting the available tokens to only what is made available by investors.
The liquidity pool is a collection of invested tokens by investors that provide a marketplace for users to exchange tokens on pancakeswap. The liquidity providers(investors) earn liquidity provider tokens and a portion of transaction fees as a result of providing the liquidity.
These tokens are matched based on the asset an investor invested. Ex. Depositing USDT and BUSD tokens, the liquidity providers tokens will be USDT - BUSD LP
Providing Liquidity on pancakeswap
To provide liquidity on pancakeswap swap, you have to link a Binance smart chain wallet to a trust wallet, and the link pancakeswap for the trust wallet. Steps to providing liquidity on pancakeswap include the following:
a. Open trust wallet and click on Dapps, search for pancakeswap to access pancakeswap platform (picture 1).
b. Click on the three dashed lines, select trade, and choose liquidity (Picture 2).
c. Click the add liquidity and choose the asset you want to invest in the liquidity pool.
For this demonstration, I will choose BNB and Cake as tokens I want to invest in.
Next, select the assets and click supply, then confirm supply.
Lastly the invested liquidity is seen on your liquidity page.
Question 2
Connecting Binance Smart Chain to Binance Exchange
To connect your Binance smart chain wallet to your Binance exchange account, first login into your Binance smart chain account, click the three-dotted lines, and choose the wallet direct option.
On the new page, click on Verify and connect my address.
Next, log in and read the direct connect notice, then click I understand.
On the next page, click on Connect to wallet, verify the Binance security check, and click connect on the smaller dialogue box.
Next read, verify and confirm the sign messages on both windows, stating that you own the account and wallet being used.
On the next page, confirm the address and click Bind to add the Binance smart chain to your Binance exchange account.
Lastly the connected address, showing the network type and an option to disconnect.
Transaction
I transferred my BNB (BEP -20) token from Binance exchange to my Binance smart chain wallet.
Question 3
Difference between Metamask and Trust wallets
Metamask and Trust wallet are both decentralized wallets, that users with full access control, secrete phrases, and private keys. They are both secured and user-friendly.
(please note that the security of decentralized wallets, depends on how secured the private key and secret phrases are).
Metamask was developed based on ethereum Blockchain and accepts ERC-20 tokens, while Trust wallet was developed based on Binance Blockchain. Trust wallet is a multi-coin wallet that accepts ERC-20, BEP-20, ERC721, etc.
Both Metamask and Trust wallet can integrate Binance smart chain wallet, this is because binance smart chain was built to accommodate Ethereum based wallets.
Metamask and Trust wallet can both can be linked to decentralized exchanges like pancakeswap, to exchange assets, stake, and provide liquidity.
Trust wallet has limited accessibility, it can be accessed via a mobile phone application and when connected to a Binance exchange account. Whereas, Metamask has multiple access links, which include Web wallets (extension), mobile applications, linked to an exchange account, etc.
Which is better?
I prefer Metamask wallet, because of its all-around accessibility. Metamask is not as easy to use as Trust wallet but its security features are better.
Since Binance smart chain was designed to accept ethereum based tokens, it can be linked to the Metamask wallet, I would say Metamask is more complete.
Question 4
Pancakeswap and Uniswap
Pancakeswap and Uniswap DEX are decentralized exchanges, that use the Automated market maker (AMM) model to provide liquidity on their platforms. Liquidity providers are reward with liquidity providers tokens on both platforms for creating liquidity.
Pancakeswap and Uniswap do not require the know your customer (KYC) verification before it can be used for exchange activities. Users can access both platforms by simply linking wallets to them (Metamask or Trust wallets).
Staking of assets can be done on both decentralized exchanges, as it also contributes to liquidity generation for the platform. And they use the proof-of-stake for validation of transactions within the blockchain.
Features on both pancakeswap and Uniswap
Swap
Pancakeswap and Uniswap both provide exchange (swap) services as their core function in the decentralized ecosystem. This helps users within the decentralized network swap crypto assets.
Liquidity pool
The liquidity pool feature on both DEX provides exchange access to users. This pool is created by investors depositing their assets in the exchange by so doing generates liquidity.
Reward Token
Liquidity providers on both exchange platforms are rewarded with liquidity provider tokens and fractions of transaction fees as well.
Staking
Both offer staking activities, this allows users to lock their assets and earn passive income through staking.
Core Difference
Blockchain
The difference between Pancakeswap and Uniswap is that Pancakeswap is based on Binance Blockchain powered by the Binance smart chain while Uniswap is based on the ethereum blockchain and powered by the Ethereum network.
Transaction Fees
The difference is seen in full effect in the cost of transactions. The transaction fees and gas fees of Ethereum blockchain is very high compared to other decentralized exchange.
Listed Asset and Volume
Another difference is the number of the listed asset on the exchanges, Uniswap is very popular, has more assets listed, and a higher trading volume than the pancakeswap.
Which is Better?
I prefer Pancakeswap because, of the low transactions fees, pancakeswap is attached to the Binance ecosystem which offers a variety of services and reduces transaction fees as well.
Pancakeswap may have fewer assets listed and lesser volume traded, but it is a fast-growing network that once overtook Uniswap in volume traded.
Question 5
Connecting Metamask to pancakeswap
Pancakeswap and Metamask as both decentralized-based exchanges and wallets respectively. To connect Metamask wallet to pancakeSwap exchange follow the steps below
Steps
a) Open pancakeswap website
b) Open Metamask wallet using the web extension wallet.
c) Click connect on the top right of the website
d) Choose the wallet (in this case, Metamask)
e) Next, choose the wallet and click connect.
The wallet will be connected to the website in this case Pancakeswap.
Conclusion
Decentralized wallets and exchanges provide a secured, and easy to use crypto experience for users. Pancakeswap and Uniswap are top decentralized exchanges based on Binance smart chain and Ethereum blockchain respectively.
Each of the exchange have good features, though the transaction fees on Uniswap is higher, it offers a wider range of crypto asset I'm its liquidity pool.
Metamask and Trust wallet have similar features but the core difference is the technology they are built on. Metamask is an ethereum based wallet and Trust wallet is a Binance smart chain based wallet.
All Thanks to you professor @yousafharoonkhan for this wonderful lesson.
Thank you so much for this post! Binance and Ethereum indeed is leading this market.
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Season 3 | intermediate course class week 3
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