This report dives into PancakeSwap after its v3 update — covering ultrasound CAKE tokenomics, multichain expansion, new product launches and future outlook for the decentralized exchange.
This report looks at:
- PancakeSwap V3
- PancakeSwap multi-chain expansion
- PancakeSwap innovation in 2023
- Ultrasound CAKE tokenomics
- Roadmap and future outlook for PancakeSwap
Join us in showcasing the cryptocurrency revolution, one newsletter at a time. Subscribe now to get daily news and market updates right to your inbox, along with our millions of other subscribers (that’s right, millions love us!) — what are you waiting for?
What Is PancakeSwap?
- An exchange to swap tokens
- A yield farm to earn rewards
- Syrup pools to stake CAKE tokens
- Ethereum liquid staking (wBETH) and simple staking
- Pancake Protectors game
- v3 position manager (new feature)
- A prediction market
- Initial Farm Offering (IFO) token launches
- A bridge to bridge CAKE to Ethereum and Aptos
- A lottery
- An NFT marketplace
PancakeSwap has an anonymous team of “Chefs,” working in the PancakeSwap “Kitchen.” The platform is open-source and has been audited by multiple reputable blockchain security firms like Peckshield and Slowmist.
Although the bear market has impacted TVL and trading volume for the protocol, PancakeSwap still boasts an annualized revenue of $27 million, with 42% of CAKE is staked:
What Is PancakeSwap V3?
PancakeSwap V3 introduces several key innovations and features to improve capital efficiency, lower fees for traders, increase earnings for liquidity providers and enhance the overall user experience.
PancakeSwap V3 allows for capital concentration, enabling liquidity providers to focus their capital on specific price ranges rather than distributing it evenly across the entire price range. This concentration of capital where the majority of trading activity occurs can provide up to 4000x higher capital efficiency compared to V2, particularly for stablecoin pools. As a result, liquidity providers can earn significantly more fees on the same amount of liquidity.
Traders also benefit from lower trading fees in V3, as there are now 4 tiers of fees: 0.01%, 0.05%, 0.25% and 1% compared to the fixed 0.25% fee in V2. The tiers cater to the needs of different trading pairs based on expected volatility and trading activity. Concentrating liquidity in active ranges also reduces slippage for traders. V3 also implements a smart router to find the best trading route across V3, V2 and StableSwap pools.
For liquidity providers, the ability to choose fee tiers, customize price ranges, create non-fungible liquidity positions and concentrate capital provides more flexibility and potential to maximize earnings. V3 also introduces active liquidity farming, which rewards users in CAKE tokens when prices fall within the price ranges of their active liquidity positions. Other features include a VIP trading rewards program and position manager for easy single-click deposits.
One of the newest and most innovative features added to PancakeSwap is the Position Manager. It introduces auto-compounding of rewards, thus all fees and rewards earned by the liquidity position are automatically compounded back into the pool. This exponentially grows a provider's position over time through the power of compound interest. Furthermore, the Position Manager handles gas fees and position rebalancing automatically, mitigating the risk of impermanent loss. Providers can supply liquidity in concentrated price bands to maximize fees from high trading volumes and choose strategies optimized for their risk tolerance.
Ultrasound CAKE Tokenomics
PancakeSwap has consistently dedicated efforts to transition CAKE to a deflationary token through strategic burning. The exchange has implemented several changes, driving organic trade volumes and activity, resulting in CAKE becoming ultrasound.:
- Reduced CAKE emissions from 40 per block originally to around 1.8374 per block currently. This is achieved by allocating less CAKE rewards to farms and pools over time.
- Expected reduction in 750 million max supply cap for CAKE. With current circulation around 388 million and deflationary, CAKE will likely never hit the max cap.
- Implemented burn mechanisms into various products:
- 0.001~0.23% of every trade made on V3
- 0.0575% of every trade made on V2
- 0.004%~0.016% of every trade made on StableSwap
- 100% of CAKE sent to the Dev address
- 100% of CAKE performance fees from IFOs
- 100% of CAKE spent on Profile Creation and NFT minting
- 100% of CAKE bid by winners during Farm Auctions
- 20% of CAKE spent on lottery tickets
- 20% of all profits from Perpetual Trading
- 8% of the Pottery prize pot distributed each week
- 3% of every BNB Prediction markets round is used to buy CAKE for burning
- 3% of every CAKE Prediction markets round
- 2% of every yield harvest from all the flexible staking positions in CAKE pool
- 2% of every NFT sale on the NFT Market is used to buy CAKE for burning
- The amount of the locked CAKE
- The remaining lock duration of their locked CAKE rounded down to weeks, and the maximum allowed lock time (52 weeks).
For example, staking 50 CAKE for 10 weeks out of the maximum 52 weeks would yield around 9.61 virtual shares in the revenue sharing pool (rCAKE). This provides CAKE stakers with real yield on their holdings. The longer the lockup, the higher the proportional share of trading fee revenues.
- Both CAKE and CRV are governance tokens that give voting power when locked up for a period of time. Longer lockups grant more voting power.
- Locking up both tokens provides additional rewards and benefits to holders. For CAKE, benefits include trading fee rebates and boosts to farm yields. For CRV, benefits include increased CRV rewards.
- Locking creates scarcity and aligns incentives between the protocol and long-term focused users for both tokens.
- CAKE revenue sharing rewards loyal lockers with a portion of platform fees based on lock duration. CRV does not have a similar revenue sharing model.
- Locked CAKE boosts initial farm offering allocations for their launchpad (IFOs) and farming yields. Locked CRV does not provide these specific benefits, only extra CRV rewards.
- CRV is integral to Curve's liquidity pools and voting. CAKE is not required for providing liquidity on PancakeSwap.
- PancakeSwap emission reductions have already put CAKE on a deflationary path. CRV emissions are still inflationary.
PancakeSwap’s Multichain Expansion
Since the v3 launch at the start of Q2 (April 2023), the monthly volume and market share of PancakeSwap in terms of DEX volume have both increased. Total trading volume in Q2 grew 77% QoQ, while Q3 volume grew 11.2% compared to Q1.
Meanwhile, market share in terms of DEX volume grew 110% from Q1 to Q2, and Q3’s market share grew 92% compared to Q1.
PancakeSwap Monthly Volume
Market Share of DEX Volume
PancakeSwap on Ethereum
PancakeSwap launched on Ethereum in September 2022 and has been steadily increasing its trading volume over the last twelve months:
Looking at total value locked, PancakeSwap trails both Uniswap and Sushiswap. However, its Volume-to-TVL ratio equals that of Uniswap, signaling a sustainable growth model and potentially more capital efficiency for the exchange:
PancakeSwap on zkSync ERA
Moreover, both metrics have been growing explosively since the launch in July 2023:
PancakeSwap on Base
PancakeSwap launched on Base in August 2023 and has quickly become one of the leading decentralized exchanges of this ecosystem, in terms of trading volume, despite having a relatively lower TVL as compared to Uniswap and Aerodrome.
The total value locked on Base has been growing consistently over the last two months, currently hovering around $2M:
PancakeSwap on Linea
PancakeSwap on Polygon zkEVM
PancakeSwap on Arbitrum
PancakeSwap launched on Arbitrum in August 2023 and ranks in the top 20 for both total value locked and trading volume. Due to the entrenched competition on Arbitrum, PancakeSwap did not grow quite as explosively as on Base but has been on a steady growth trajectory:
PancakeSwap on opBNB
PancakeSwap New Products
PancakeSwap boasts a rich suite of products for exchange users:
Beyond its core exchange and farms, PancakeSwap introduced entirely new products and services in 2023. The launch of Pancake Protectors marked PancakeSwap's first move into blockchain gaming. This PvP game provides an engaging experience with NFT rewards. PancakeSwap also added fiat on-ramps through partners like Moonpay, Mercuryo and Transak. Users can now purchase crypto directly using credit cards, bank transfers and other fiat payment methods.
Other new offerings include Liquid Staking via Synclub and the revival of Farm Auctions, which had been paused. PancakeSwap also introduced a Revenue Sharing program to reward loyal CAKE stakers. Moreover, PancakeSwap's signature yield farming continues to expand. Over 200 new farms were added across multiple chains in 2023. Products like bCAKE v3 help users maximize their yields.
Finally, PancakeSwap boosted its trading experience through integrations that improve execution and reduce costs. Beyond the introduction of PancakeSwap v3, perpetuals received a major v2 update with new features like Degen Mode. Integrating market makers and leveraging Celer Network’s bridging capabilities enable zero-slippage trades on non-BNB Chain pairs. The adoption of Bloxroute's security solution Private RPC aims to protect users from bots and front-running.
Roadmap and Future Outlook
PancakeSwap has an ambitious roadmap focused on enhancing user experience through innovation across multiple aspects of its platform.
Furthermore, PancakeSwap will bring its entire suite of DEX offerings like trading, yield farming, lottery and others to all its supported chains. This also includes the introduction of multichain gaming.
Other key updates planned:
- Integrating notifications system: This will enable important alerts and updates to be pushed directly to users via both the PancakeSwap interface and connected wallets.
- Increasing prediction fees through multichain expansion: PancakeSwap is considering generating greater prediction fees by expanding and attracting users from other chains, to boost CAKE burning.
- Reducing max supply: PancakeSwap plans to reduce the max supply of CAKE from the current 750 million by the end of the year. The estimated timeline is the end of 2023.
- Resuming trading competitions: PancakeSwap may resume trading competitions in the future based on market conditions to increase engagement. But current trading rewards are more flexible.
- Integrating with asset-backed partners: PancakeSwap is exploring partnerships with real world asset backed protocols to attract institutional capital.
- GameFi Expansion: PancakeSwap is exploring a gaming platform where third party developers can develop and release their multichain games on PancakeSwap.
Longer-term, PancakeSwap aims to be a seamless, user-friendly, and decentralized all-in-one DeFi platform accessible across multiple blockchains. The exchange continues to build and ship innovative products while optimizing tokenomics.