PancakeSwap is an automated market maker (AMM) and decentralized application (DAPP) that enables the trading of various digital assets. CAKE is a BEP20 token whose main function is to incentivize the liquidity provision to the PancakeSwap platform and enable participation in the governance of PancakeSwap by voting on existing proposals or creating their own. Users with 10 or more CAKE tokens are eligible to participate in lottery events. These rewards may vary from PancakeSwap’s original NFTs to CAKE payouts directly.
A brief history
Launched by a group of anonymous developers in 2020, PancakeSwap is a decentralized exchange built on the Binance Smart Chain (BSC), a blockchain with much lower transaction costs than Ethereum or Bitcoin. At the time of PancakeSwap's launch, Ethereum was suffering from high transaction fees and network congestion as the increasing interest in the DeFi space drove massive network demand. PancakeSwap also offered a lower swap fee of 0.2% compared to the industry standard of 0.3%.
CAKE in practice
PancakeSwap allows users to trade/swap crypto tokens and also provide liquidity, stake funds in return for BNB and more. PancakeSwap operates as an automated market maker (AMM) akin to Uniswap and SushiSwap. This means the platform does not rely on an order book to match buyers and sellers and instead uses liquidity pools to link parties directly. This allows PancakeSwap to provide better rates, speed, and reduce slippage.
