As Ethereum’s transaction fees continue to get more expensive, investors are looking for more cost-effective alternatives. To make a transaction on decentralized exchanges (DEXs) built on the Ethereum network, you'll need to spend upwards of $100 on transaction (gas) fees. These gas fees fluctuate with network usage, and can sometimes be several hundreds of dollars.
Luckily, other blockchains have more cost effective transaction structures, such as Binance Smart Chain. While there are tradeoffs made in regards to decentralization and security, Binance Smart Chain lets users transact on its blockchain for less than a dollar. The leading exchange built on Binance Smart Chain is PancakeSwap, and retail investors are using it as an alternative, cheaper DEX than Uniswap on Ethereum.
These inexpensive fees are largely due to Binance Smart Chain’s Proof-of-Stake consensus model. Learn how to buy PancakeSwap (CAKE) now.
What is PancakeSwap?
PancakeSwap is a leader in the decentralized finance (DeFi) industry. DeFi replaces the need for financial intermediaries like lenders, exchanges, insurance and even investment funds. These intermediaries can be replaced with smart contracts: code uploaded to the blockchain to perform financial transactions.
While most of the DeFi industry is built on Ethereum’s network, more developers are choosing alternative blockchains, such as BSC, because of the significantly lower transaction and development costs.
PancakeSwap is the leading DEX on Binance Smart Chain. The platform lets investors trade cryptocurrencies through smart contracts, so there’s no need to trust a 3rd party to have custody of your funds. Also, trading on a DEX is anonymous, since you only need to connect your cryptocurrency wallet to trade crypto –– there’s no need to make an account with DEXs.
Because PancakeSwap is decentralized, it can’t provide its own liquidity for investors to buy and sell crypto. Instead, investors can stake their cryptocurrencies in smart contracts to earn passive income from the exchange’s transaction fees.
Brief History of PancakeSwap
The founders of PancakeSwap are anonymous, which may concern some investors. However, the DEX’s code has been audited, and it’s likely safe to use. CAKE, the native token on PancakeSwap, began trading when the DEX launched in September 2020. At the time, the token was trading below $1. As of December 2021, CAKE is trading for around $12 per token.
PancakeSwap is a fork, or copy, of Uniswap. Uniswap is the leading DEX on Ethereum’s network, and the platform exchanges more volume on its network than Bitcoin’s network. However, PancakeSwap has some advantages over Uniswap. Namely, the fees on Binance Smart Chain are less than 1% of the fees on Uniswap, making it viable to use with small amounts of capital.
PancakeSwap also offers CAKE tokens to liquidity providers to incentivize investors to stake their crypto for interest. These rewards can be sold at market price, or you can use them to enter PancakeSwap lotteries.
Step 1: Open an online account.
In order to buy CAKE tokens, you’ll need to make an account with Binance. Binance is the largest cryptocurrency exchange in the world, but some features are limited if you’re located in the U.S. To abide by the U.S. Securities and Exchange Commission (SEC) Know Your Consumer (KYC) regulations, you’ll need to verify your identity to begin trading.
If your computer’s IP address is located outside of the United States, then you can access Binance’s full-featured website. The best way to fund your account is with cryptocurrency. The best exchanges that let you easily connect to your bank are Coinbase, Gemini and Kraken.
Step 2: Buy or download a wallet.
No matter which cryptocurrency you invest in, you shouldn’t hold your funds on an exchange. Cryptocurrency exchanges are large targets for hackers, and several platforms have been hacked in the past. Since centralized exchanges hold custody of investors funds, if there’s a security breach these funds can be stolen.
Hardware wallets are the safest way to store cryptocurrency. These wallets store crypto on physical devices offline, making it impossible to access online. If you’re looking for a free alternative to store your crypto securely, then you should consider using a software wallet.
Best Hardware Wallet: SafePal S1
Since Binance Smart Chain’s BEP-20 tokens haven’t even been out for a year, there aren’t many cryptocurrency hardware wallets that support BSC tokens yet. The best hardware wallet that supports CAKE tokens is the SafePal S1.
The SafePal S1 is a multicurrency wallet, and it can support over 10,000 different cryptocurrencies. More likely than not, the SafePal S1 is the only hardware wallet you’ll ever need.
SafePal also has a mobile app that lets you manage your portfolio from your phone.
Best Software Wallet: Trust Wallet
Trust Wallet is a multicurrency wallet which supports Binance Smart Chain tokens. The wallet is free to download on iOS and Android, making it an extremely accessible option for new or experienced crypto investors.
Trust Wallet can also connect to PancakeSwap, allowing you to trade crypto directly from your wallet.
Step 3: Make your purchase.
After choosing where to store your crypto assets and making an account with Binance, you’re ready to make your purchase. Binance offers a few pairs you can trade CAKE tokens with, including CAKE-USDT, CAKE-BTC and CAKE-BUSD.
BUSD and USDT are stablecoins pegged to the price of the dollar, so it simulates buying CAKE tokens with the U.S dollar. Alternatively, you can trade the CAKE/Bitcoin pair. Some crypto investors like to trade against Bitcoin, as Bitcoin’s returns are seen as the “standard” return in the cryptocurrency markets.
If large decentralized exchanges like Uniswap and SushiSwap can’t solve their scalability problems, then more users may opt to use PancakeSwap instead. Transacting on Ethereum’s blockchain can cost over $100, making it infeasible for many investors to use.
Trade, Sell or Convert your CAKE tokens
If you’re using Trust Wallet to store your CAKE tokens, then you’re able to trade your crypto directly from your wallet. Just connect your Trust Wallet to PancakeSwap.finance and you can start trading.
When you want to cash out of your investment, just send your crypto from your Trust Wallet to a crypto exchange that’s connected to your bank account.
Current Crypto Prices
Looking at the macrotrend, the cryptocurrency industry is in a bull market. However, as of late many crypto prices have dipped over 25%, presenting a buy opportunity for long-term investors. Even with this dip, many large cryptocurrencies like Ethereum, Uniswap and BNB token are up over 100% since the beginning of the year.
Is PancakeSwap a Good Investment?
Historically speaking, PancakeSwap has been a great investment. The token increased over 1,000% in less than a year, providing a huge return on investment to early investors.
If Ethereum’s blockchain isn’t able to scale soon, it’s likely that PancakeSwap will continue to see an increase in adoption. However, if Ethereum does solve its scaling problems, then users may opt to use Ethereum’s robust network over the Binance Smart Chain.
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