What is PancakeSwap?
PancakeSwap is a Decentralized Exchange (DEX) powered by the Binance Smart Chain (BSC), which operates through an Automated Market Maker (AMM) to complete the orders. PancakeSwap replaces an order book with a liquidity pool. According to CoinMarketCap, it ranks third among the top DEXs operating in the market.
Like many other DEXs, PancakeSwap did not raise money through IDO or ICO. Instead, the team working behind the exchange bootstrapped all the funds. The platform is funded through the Treasury, which earns 12% of the commission from all transaction fees.
Liquidity providers interact with the PancakeSwap’s Syrup Pools and receive tokens called $FLIP. These tokens represent their share in the pool. Users can also farm for two other tokens named $CAKE, their native token, and $SYRUP. Moreover, since the platform operates on BSC, it supports thousands of BEP-20 tokens.
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What is Uniswap?
Uniswap is the undisputed king of DEXs. It was the first DEX to attain the level of popularity and trading volume like some of its centralized counterparts. Being one of the first Automated Market Makers (AMM), Uniswap allows the users to assume the role of liquidity providers (LPs) and contribute funds to decentralized liquidity pools. Consequently, the LPs gain a fraction of the fees generated by the pool as a source of passive income.
Launched in 2018, Uniswap has gone through multiple upgrades. Uniswap is running on its third version with improved capital efficiency, multiple fee tiers, and better oracles.
Since its launch, Uniswap has amassed more than $800M in trading volume and hosted one of the most profitable Airdrops.
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The Rivalry
After an incredible DeFi summer in 2020, Uniswap established itself as the top contender among DEXs operating in the market. Users viewed Uniswap as a benchmark for DEXs.
While most DeFi-focused projects were willing to take up that mantle, PancakeSwap emerged as a formidable contender. Within the first 49 days of 2021, PancakeSwap’s volume boomed from a meager $37M to a staggering $1B.
However, this incredible growth was attributed to the shortcomings of the Ethereum blockchain, which hosts the Uniswap platform. ETH suffered scalability issues due to its reliance on the Proof-of-Work (PoW) consensus mechanism. Consequently, the congestion on the platform gave rise to high gas fees on the network. The Proof-of-Stake (PoS) shift is scheduled for August this year.
PancakeSwap vs. Uniswap: A Comparison
- $CAKE vs. $UNI
The base asset of PancakeSwap is its native token $CAKE, which works as its governance token while providing farming and staking functionalities. Users can accumulate more $CAKE tokens by providing liquidity, staking, and purchasing them on an exchange. Moreover, users can trade $CAKE tokens issued to LPs in the open crypto market.
The native token of Uniswap, known as $UNI, was airdropped to the platform users back in September 2020. The actual use case of the token is to facilitate decentralized governance.
PancakeSwap has another token called $SYRUP. It enables users to receive 40% of $CAKE emissions as rewards.
Adoption Rate
It is challenging to select a single DEX for this category. Uniswap is much older and has a formidable base of users. At the same time, the adoption rate of PancakeSwap is growing efficiently.
Uniswap introduced the first AMM functionalities, which no other project at the time could successfully do so. However, PancakeSwap has more active users than Uniswap, even though Uniswap leads in terms of the trading volume.
Transaction Costs
Ethereum lost the contest on this one, making room for other platforms with smart contract capability to explore the opportunities. Gas fees have been rising exponentially with Uniswap running on the ETH platform.
This is quite a problem for Uniswap users who need to transact small amounts. Otherwise, the gas fees would take a part of their profits. PancakeSwap, on the other hand, can offer dramatically lower transaction costs as it uses a blockchain with cheaper transactions (Binance Smart Chain). Apart from lowering transaction costs, BSC also has better transaction speed.
Trading Volume and Liquidity
Uniswap still enjoys the leading position, although there is considerable liquidity on PancakeSwap. Most of the tokens on Uniswap have significantly more liquidity when compared to PancakeSwap.
As of now, Uniswap has the upper hand when it comes to daily trading volume. Due to the volatility in the Defi ecosystem, PancakeSwap has to maintain an upward trajectory to match Uniswap and beat the latter in terms of the trading volume.
What’s next?
The rivalry between these two DEXs extends beyond themselves as it becomes a tussle between the advantages and shortcomings of the Ethereum and the BSC blockchains.
The high trading volumes on BSC indicate the demand for cheaper and faster transactions. Although Uniswap is quite ahead in terms of trading volume right now, PancakeSwap has a formidable user base thriving on the success of the BSC blockchain. If Ethereum 2.0 can successfully roll out, Uniswap might gain a lot more traction.
The increased competition has put immense pressure on Ethereum developers to speed up the deadlines marking the roadmap leading to its proof-of-stake final form, ending its current scaling issues.
