KICK on PancakeSwap
As winter kicks off, we’re introducing some very cool updates into our ecosystem. On our path to multi-chain technology, our first step was the Binance Smart Chain network with its high speeds and low fees. From that moment on, KICK token has been added to the BSC blockchain, and we’ve been listed on PancakeSwap. Let’s take a closer look at the principles of this DEX platform, how to use it, and what its advantages are.
How DEX differs from CEX
Traditional centralized exchanges (CEX) have been around since the dawn of the cryptocurrency era. They have many advantages, such as the ability to create limit orders (stop-loss, take-profit), and trading with leverage. However, they also have their disadvantages. For instance, a user has entrusted their money to the exchange in order to trade on the platform. More specifically, the user has to transfer their money from their personal wallet to the exchange’s wallet before trading.
For one user to sell their tokens to another, they can do that on CEX through an intermediary only, a guarantor. The guarantor in this case is the exchange.
DEXs, on the other hand, don’t have this drawback. Here, a user can effectuate transactions with another user without having to run it by a guarantor using the so-called liquidity pools (we’ll talk about them in detail later). As a result, you don’t have to transfer your money to the exchange’s wallet, just connect to Dapps and make the transactions there.
How to start trading on PancakeSwap
PancakeSwap is the top DEX in the Binance Smart Chain network. It has the largest BSC trading volumes, capitalization, and the largest number of registered users. In addition, it’s a Binance Labs project, which means it’s directly connected with the market giant, Binance. That’s why we started with a listing on PancakeSwap.
So how does one start trading?
- First, you need to sign up for a cryptocurrency wallet (most of you likely already have one). For example, you can use Metamask, Trust Wallet, or SafePal.
- After that, head on over to PancakeSwap’s Dapps (decentralized app) and connect your wallet by clicking the Connect Wallet button in the upper right corner.
- The service will provide you with a selection of supported wallets. You’ll need to select yours, navigate to the wallet, confirm the connection, and return to Dapps.
- Then, go to Trade (located at the top left) and click Exchange.
- In the trade window, you can see available token pairs. You have to select the first one at the top and then the token you want to exchange (swap) at the bottom.
- Sign the transaction using the Approve button and send it to the blockchain by clicking Confirm. At that point, the exchange is complete.
Watch out! Before trading, you should go to your settings (the gear icon in the corner) and set them up. Slippage is what you should focus on here. This dictates whether or not the transaction will go through and if the exchange rate of the token changes at the time of its approval.
How liquidity pools work
On decentralized exchanges, we’ve understood that users interact directly with each other. How is this implemented, though? After all, everyone wants to exchange tokens of different quantities. The exchange takes place through liquidity pools through an automatic market maker. How does this work?
Let’s say you need to exchange tokens in the BNB-BUSD pair, that is, sell your BNB and get BUSD in return. The transaction volume can be arbitrary, and it would seem that you need to find a seller with the exact same volume. Everything’s actually much simpler — there are liquidity pools for each trading pair from which we can take as much BUSD as we want and input any amount of BNB.
And who adds their funds (liquidity) to these pools? This is the most important thing: the pools are formed by the users themselves. PancakeSwap pays a share of transaction fees to them for providing liquidity. This process is called farming. Let’s look at it in detail.
Farming in liquidity pools
And so, on any DEX, you can find liquidity pools to which users add their own funds. In return, the platform gives them rewards from the pool’s commissions. Here’s an example with the same pair as earlier, BNB-BUSD. To add your liquidity to this pair’s pool, you need to add these tokens to it in equal proportions. In return, PancakeSwap will give you LP tokens, which proves your ownership. These are the ones you can put into farms to make a profit; this process is called farming.
What this process looks like step-by-step:
- Go to PancakeSwap, navigate to the Trade section, but this time go to Liquidity.
- Click Add Liquidity and select the token pair of your choice.
- Your current pair of tokens is removed from your wallet, and LP tokens appear instead.
- Go to the Earn section and click Farms.
- Find your pair in the list of farms and add liquidity to the pool.
After that, you will begin to receive rewards for all user transactions in this pool. You can see them under the rewards label, and you can withdraw them with the Harvest button. You can withdraw your LP tokens by clicking on the minus. This way, the LP pair will break up, and you’ll get your tokens back.
But there’s an important thing to keep in mind here — if the rate of one of the tokens changes during farming, you’ll get a different amount than what you invested. This is called impermanent loss, meaning farming on PancakeSwap is only profitable over a long period of time, when the rewards received from the farm cover the losses fully.
In addition to farming, having KICK on PancakeSwap is convenient for ease of trading, low commissions, and high transaction speeds. It will additionally add volume to the trading turnover and increase the number of instruments in the hands of our users.