Pancake Swap, Uniswap: How it works

Since 2017, countless crypto-asset exchange platforms have sprung up. Most have simply followed the same pattern as every other website we've seen until recently. Many have chosen to refer to their exchange as “ decentralized ". Among these, we have for example Pancake Swap, Uniswap, Liquid Swap.

You are probably wondering how these three decentralized exchangers work? You are in the right place. In this article, you will learn the peculiarities of each of these decentralized exchanges. Let's go!!

What is Pancake Swap?

Swap Pancakes, it's a bit like the McDonald's of the crypto world, but in a decentralized version and without the fries. It's something that runs on the Binance Smart Chain blockchain, and allows people to exchange crypto with each other without going through an annoying middleman. Imagine a big virtual bazaar where you can exchange your tokens for other tokens. You don't have to ask anyone for permission, there's no guy in a suit checking your identity, you make your trades and that's it. It's fast, it's cheap, and it's open 24/7.

But Pancake Swap, it's not just for exchanging cryptos. You can also earn interest by lending your cryptos to the system. It's like putting your money in the bank, except the rates are much higher (but be careful, the risks are too).

And then there's the funny thing: farming pools. It's like planting your cryptos and they grow by themselves. You put your tokens in a "farm", and presto, it brings you more tokens. It's a little complicated to understand at first, but once you get the hang of it, it's quite addictive.

Oh, and I forgot the most important thing: the CAKE token. It's Pancake Swap's native crypto. It's a bit like loyalty points at McDonald's, except that here, it can really be worth something. You can use it to vote on the evolution of the platform, to participate in lotteries, or even to exchange it for other cryptos.

How Pancake Swap works

PancakeSwap's character as a decentralized exchanger is quite evident at the moment. Most likely, the simplest but most viable part of the DEX is Binance Smart Chain's blockchain channel addiction. Binance Smart Chain offers a faster and more financially savvy option for Ethereum.

The PancakeSwap uses the automated market model or the AMM framework like other DeFi portals such as Uniswap. This implies that users can trade crypto assets through liquidity pools. Traders do not need to rely on an order book, where they have to hold on to walking orders. As reflected in the AMM framework, investors have to add their assets to liquidity pools that contain other users’ funds.

Token holders must store their assets in liquidity pools to claim LP tokens in return. Then, they can use these tokens to get their share and a portion of the trading fees. Another important feature of how PancakeSwap works hints at the improvement of liquidity pools.

You can store crypto assets in liquidity pools on the DEX and become a liquidity provider with LP tokens. Currently, you can store LP tokens and cycle them in exchange for rewards with the portal's native coin, the CAKE.

Transaction fees on PancakeSwap

In order to better understand the transaction fees on PanCakeSwap, we will analyze two types of exchanges.

Exchange of liquidity pool tokens

Trading in the PancakeSwap spot market is done through the exchange of assets in liquidity pools. Trading through liquidity pools does not involve the "matching"orders as in the exchanges of"order book", so there are no maker or taker fees. The only trading fees charged are the protocol liquidity pool fees which are paid to liquidity providers in part or in full. PancakeSwap charges 0,25% trading fee, distributed as follows :

0,17% - Returned to liquidity pools as a fee reward for liquidity providers.
0,03% - Sent to Treasure PancakeSwap.
0,05% - Sent to redeem and burn CAKE.

Also keep in mind that apart from the fees mentioned above, some tokens may charge a “tax” for transfers or sales of the token. This “tax” could increase the effective fees paid by the user.

Perpetual Futures Market

The PancakeSwap Perpetual Futures Market uses an off-chain order book and an on-chain settlement mechanism. This means that users are subject to “ maker " and of " taker ". Trading fees are 0,02% of nominal value for decision makers and 0,07% for the lessee. CAKE will be the default payment option for trading fees, followed by APX (ApolloX's token) and USDT.

All users who pay trading fees in CAKE will enjoy a 5% discount on trading fees. This translates to trading fees 0,019% for manufacturers and 0,0665% for buyers who pay the fees using the token CAKE.

Benefits of PancakeSwap Exchanger

Fees at Pancake Swap are not really cheap. It's like going to the movies and the popcorn costs nothing. On PancakeSwap, you pay peanuts to make your trades. It's nice for the wallet, especially when you compare it to the big centralized platforms that suck your money.

Otherwise, it's fast like lightning. You click, and presto, it's done. No need to wait ages like when you make a bank transfer. It's convenient when you're the impatient type or want to take advantage of a good opportunity quickly.

La variety of cryptos, This is another big plus. It's like an all-you-can-eat buffet, but for tokens. You can find everything, even obscure cryptos that you wouldn't see on the big platforms. It's a paradise for hidden gem hunters. And then, there's the anonymous side of it. No need to give your ID, your address, your dog's name... You connect your wallet and off you go. It's cool if you're the discreet type or if you don't want to spend three hours filling out forms.

Le yield farming and staking, it's like the cherry on top. You can put your cryptos to work instead of letting them sleep. It's like your money is growing babies while you're lounging around on your couch. The interface is pretty cool too. It's not the prettiest thing in the world, but it's clear and you don't get lost. Even if you're not a tech genius, you should be able to get by. It's not like some crypto sites where you feel like you're in front of a rocket's control panel.

And then there's the community aspect. PancakeSwap is a bit like a club. People chat, share information, vote for the evolution of the platform. You feel like you're part of something, not just using a service.

Everything you need to know about Uniswap

Uniswap (UNI) is a decentralized exchange (DEX) operating on the Ethereum blockchain. Founded in 2018 by Hayden Adams, Uniswap quickly received financial support from the Ethereum Foundation and Vitalik Buterin to grow. Before Uniswap came along, cryptocurrency trading was dominated solely by centralized exchanges (CEX) such as Binance or Coinbase.

In just a few years, Uniswap has managed to establish itself as a benchmark in the DEX world by generating more than $5 billion in transaction volume daily and having more than $3 billion locked into its protocol. Unlike CEXs, DEXs allow cryptocurrencies to be exchanged in a completely decentralized manner, without the use of an intermediary. In practice, they are censorship-resistant exchanges, but since version XNUMX, Uniswap is no longer open source: the protocol is copyrighted.

Uniswap was the first protocol to take DEXs to the next level with an automatic market maker (AMM) that aggregates liquidity deposited by users and makes it available to traders via an algorithm. Uniswap operating on the Ethereum blockchain, It is possible to trade only ERC-20 tokens and ETH. It is also the largest DEX on the Ethereum blockchain and a key decentralized finance (DeFi) platform in the cryptocurrency landscape.

How Uniswap works

The heart of the thing is what we call the "liquidity pools". It's like big bins filled with different cryptos. For example, you have a bin with Ether on one side and USDC on the other. These bins are filled by users by putting their own cryptos in them.

When you want to trade, say Ether for USDC, you throw your Ether into the bin, and the machine spits out USDC in exchange. The price, it's calculated automatically based on something they call "constant product formula". It's a bit complicated, but basically, the more you want to trade, the more expensive it becomes. The cool thing is, you don't need a buyer in front of you. You trade directly with the pool. It's like you're trading with a robot instead of a human.

There is also something called "slippage". It's when the price moves while you're making your trade. It's like the price of bread changing between the time you take it off the shelf and the time you get to the checkout. On Uniswap, you always have to put a slippage margin to make sure your order goes through. And then there are the famous gas fees that we talked about. This is the price you pay to have your order processed on the Ethereum blockchain. It's like the stamp on a letter, except the price of the stamp changes every 5 minutes.

Uniswap also has its own token, UNI. It's a bit like platform shares. It gives you the right to vote on the evolution of the thing, and sometimes to win rewards.

Transaction fees on Uniswap

Basic, Uniswap takes 0,3% on each exchange. It may not seem like much, but when you make big trades, it can quickly add up. It's like buying a coffee every day: at the end of the month, you wonder where your money went. But be careful, the real trap is not this 0,3%. The thing that can make you cry is the gas fees. It's like gasoline for your car, except that here, it's to move your transactions on Ethereum.

And the gas costs, it's the lottery. Sometimes it’s cheap, sometimes it’s crazy. When the Ethereum network is congested, like when a new hype project comes out, fees can skyrocket. It’s like trying to buy tickets to a super popular concert: suddenly everything becomes super expensive. There are times when gas fees can be higher than your exchange itself. It’s like paying more for the packaging than the product. It hurts your heart (and your wallet).

So, you have to be smart. There are sites that show you gas fee trends. It's like checking the weather before going out. You see when it's cheapest and you make your trades at that time. Uniswap tried to improve this with its V3. They added things to optimize fees, but it's still expensive compared to other platforms on less congested blockchains.

The thing is, the bigger you trade, the less the fees hurt proportionally. That's why the big fish don't really care. But for the small Sunday trader, it can quickly become frustrating.

What to know about the Liquid Swap exchanger?

Liquid Swap is like the little brother of Pancake Swap and Uniswap, but Binance version. It's like Binance said "Hey, what if we made our own decentralized exchange thing, but kept a little bit of control over it?" So, how does this mess work ?

It's pretty simple actually. You have liquidity pools, like on other decentralized exchanges. Imagine big bins filled with different cryptos. You can put your own tokens in them to earn interest, or use them to trade. Liquid Swap is directly integrated into Binance. No need to connect an external wallet or juggle between different platforms. You're on Binance, you click on Liquid Swap, and there you are. It's convenient, especially if you're already a Binance user.

Fees are where it gets interesting. They are generally lower than on Uniswap for example, because it runs on the Binance Smart Chain. It's like taking the highway instead of the back roads: it goes faster and costs less.

Another cool thing is that you can earn interest by providing liquidity. It's like putting your money in a savings account, but with much higher rates (and risks too, don't forget). Now, don't forget that even if it's "decentralized", Binance still maintains a certain amount of control. It's a bit like an amusement park: you're free to do what you want, but there are still rules and someone who's watching.

Another thing to know is that Liquid Swap uses different pricing models depending on the pools. There is the classic model like Uniswap, but also more complex stuff for certain pairs. You have to do a little research before diving in. But as always in crypto, you have to be careful. Just because it's on Binance doesn't mean it's risk-free. You have to understand what you're doing, not invest more than you can afford to lose, and always keep an eye on your investments.

Transaction fees on Liquid Swap

Transaction fees on Liquid Swap are an important aspect to consider for users who want to trade assets. Typically, these fees vary depending on several factors, including the type of asset being traded and market liquidity.

Swap Fees : During each exchange, a small commission is charged, generally expressed as a percentage of the amount exchanged. These fees are used to remunerate liquidity providers and cover the operational costs of the platform.
Liquidity Fees : Users who provide liquidity to the platform may also be subject to fees. However, in return they receive a share of the transaction fees generated by the exchanges carried out on the platform.
Impact of Volatility : Fees may also fluctuate based on market volatility. During busy periods, fees may increase due to increased demand for exchanges.
Minimize costs : To reduce fees, some users choose to trade assets at times when trading volume is lower, which can lead to lower fees.

It is therefore essential to fully understand these fees before trading on Liquid Swap, in order to optimize your transactions and maximize your profits.

Comparison between Pancake Swap, Uniswap and Liquid Swap

Pancake Swap is a decentralized exchange based on the Binance Smart Chain, offering low transaction fees.about 0,2%. Using an Automated Market Maker (AMM) model, it allows users to trade assets BEP-20 and earn rewards in CAKE, its native token. Pancake Swap also offers additional features like lotteries, NFTs, and staking, making it a popular platform in the BSC ecosystem.

Uniswap, meanwhile, is one of the most recognized DEXs on Ethereum, with fees of 0,3% transaction. It supports ERC-20 tokens and offers UNI rewards for liquidity providers. Although the interface is user-friendly, it may seem complex for beginners.

Liquid Swap stands out for its multi-chain compatibility and instant liquidity swaps, attracting a growing user base. The choice between these platforms will depend on personal preferences and specific user needs. Here is a comparison table between Pancake Swap, Uniswap and Liquid Swap:

Criteria	Swap Pancakes	Uniswap	liquid swap
Blockchain	Binance SmartChain	Ethereum	Multi-chain (Ethereum, BSC, etc.)
DEX Type	AMM (Automated Market Maker)	AMM (Automated Market Maker)	AMM (Automated Market Maker)
Transaction fees	About 0,2%	About 0,3%	Varies by asset and liquidity
Supported tokens	BNB, BEP-20 tokens	ERC-20 tokens	Multi-asset including ERC-20 and BEP-20
Liquidity providers	Rewards in CAKE (native token)	Rewards in UNI (native token)	Native token rewards
User interface	Simple and intuitive	User-friendly, but sometimes complex	Clear and easy to use interface
Additional features	Lotteries, NFT, staking	Governance, staking	Staking, instant liquidity swaps
Safety	Third-party audit	Third-party audit	Third-party audit
Popularity	Very popular in the BSC ecosystem	Very popular in the Ethereum ecosystem	Growing, but less known

This table summarizes the main characteristics of each platform, making comparison easier for users wishing to choose a DEX suited to their needs.

Conclusion

We toured the 3 different exchangers which these days are almost essential in the world of digital currency. Thanks to them, it is now possible to carry out various exchanges using digital technology anywhere in the world. They are part of the new digital era that has come to facilitate our various operations. So it is very important to know how they work.

I hope this article was very useful to you and that you were able to have the answers to your questions. Do not hesitate to consult our site to discover many other interesting subjects.

Good luck !!