What Is PancakeSwap (CAKE)?

Introduction

Since its launch in 2020, PancakeSwap has become one of the most recognisable names in decentralised finance (DeFi). Originally built as a fork of Uniswap on the BNB Smart Chain (BSC), PancakeSwap quickly differentiated itself by offering lower fees, faster transactions, and gamified DeFi experiences.

It garnered attention by being one of the first major decentralised applications (dapps) built outside the Ethereum ecosystem. 

What Is PancakeSwap?

PancakeSwap is a decentralised exchange (DEX) and automated market maker (AMM) that allows users to swap tokens directly from their wallets without the need for a central intermediary.

Unlike traditional exchanges, PancakeSwap doesn’t use an order book. Instead, users trade against liquidity pools funded by other users. Liquidity providers earn a share of the trading fees, creating mutual incentives. The platform also offers Syrup Pools, where holders stake CAKE for rewards. These pools support both flexible and locked staking options, allowing users to tailor their approach.

PancakeSwap has since expanded its offerings with features such as initial farm offerings (IFOs), prediction markets, decentralised finance (DeFi) lending and borrowing, games, and even lottery draws. It now operates on 12 different blockchains, including Ethereum, Aptos (APT), Arbitrum (ARB), Base (BASE), and Polygon (POL). 

PancakeSwap is backed by a publicly available white paper and detailed documentation.

How Does PancakeSwap Work?

PancakeSwap is powered by an automated market maker (AMM) model, where users trade cryptocurrencies by interacting with liquidity pools rather than using order books. 

Liquidity providers add pairs of BEP-20 tokens — most commonly BNB, USDT, USDC, or other major assets — to liquidity pools, earning a share of trading fees in return. While CAKE is often paired with these tokens, it is rarely used as a base asset in swaps.

In 2023, PancakeSwap upgraded its protocol to Version 3, introducing concentrated liquidity. This allows liquidity providers to define custom price ranges for their contributions, making capital allocation more efficient. Each liquidity position is tokenised as a non-fungible token (NFT), which can be traded alongside its associated assets and fees.

In May 2025, Version 4 (v4) launched with new features like a limit order book, singleton contracts (reducing gas costs by up to 99%), and AI-driven smart routing to improve fill rates and reduce slippage.

CAKE is not native to a specific blockchain, so it does not have its own consensus mechanism. Instead, transactions are processed by its host (e.g. Ethereum, Arbitrum, BNB Chain).

To support scaling, PancakeSwap integrates Google Cloud infrastructure, processing over high volumes of requests per day on BSC with quicker peak response time. Trusted Execution Environments (TEEs) and SQD data indexing further enhance security and cross-chain analytics.

Does CAKE Offer Utility?

CAKE is the network’s native utility and governance token. It provides access to staking, liquidity farming, voting on protocol upgrades, and non-fungible token (NFT) purchases via PancakeSwap’s marketplace. 

Here are the details of how CAKE powers the PancakeSwap ecosystem:

• Staking: CAKE holders can earn rewards via Syrup Pools, with some pools offering up to 55% APY.
• Governance: Through vote-escrowed CAKE (veCAKE), users vote on protocol changes, fee structures, and chain deployments. A new implementation in May 2025 prevents users from transacting their locked CAKE once votes begin.
• Burning: The ‘Ultrasound CAKE’ initiative burns 102% of weekly emissions via trading fees, prediction losses, and lottery sales.
• Access: CAKE is also used in IFOs (Initial Farm Offerings), NFT staking, and exclusive metaverse features.
• DeFi Lending and Borrowing: Users can supply assets as collateral to earn interest or to borrow other tokens. Furthermore, CAKE can be used as collateral in lending other protocols integrated with PancakeSwap.

CAKE may not be needed to swap tokens on PancakeSwap, but it is integral to community governance, ecosystem incentives, and emission control.

Benefits and Limitations of PancakeSwap

The Tokenomics of CAKE

The PancakeSwap community voted to update its tokenomics in May 2025, reducing its maximum supply to 450 million tokens while aiming for an annual deflation rate of at least 4%. The deflationary model, known as ‘Ultrasound CAKE’, is achieved by ‘burning’ weekly emissions using revenue streams from: 

• 15 to 23% of liquidity pool trading fees
• 20% of profits from perpetual trading
• 100% of IFO participation fees
• 3% of lottery and prediction market revenues

This approach aims to reduce the circulating supply over time and support CAKE’s long-term value.

Governance is handled through a vote-escrow model known as veCAKE. Token holders can lock their CAKE to gain voting power over emissions, fee parameters, and cross-chain deployment decisions. 

However, centralisation risks remain, particularly after a controversial April 2025 governance vote where eight addresses locked 25 million CAKE to sway the outcome of the CAKE Tokenomics 3.0 reform. Primarily, the proposal’s intent was to abolish the veCAKE mechanism and retire the CAKE staking model.

CAKE hit an all-time high price of $44.18 in April 2021, and its recorded all-time low was $0.1944 in late 2020. In May 2021, PancakeSwap reached a peak total value locked (TVL) of US$7.8 billion.

What Does the Future Hold for PancakeSwap?

PancakeSwap’s roadmap points toward deeper institutional integration, increased multi-chain liquidity, and continued product diversification. The 2024 rollout of v4 hints at the team’s intent to stay competitive with innovations like AI-based routing and capital-efficient liquidity management.

Recent initiatives such as real-time cross-chain analytics and Google Cloud scaling suggest a focus on institutional-grade infrastructure. However, as mentioned before, centralisation concerns persist over the incident of locked CAKE by a concentrated pool of addresses.

Whether PancakeSwap maintains its edge will depend on how effectively it can balance innovation with decentralisation, and whether it can continue appealing to both retail and institutional DeFi users.

How to Buy CAKE on Crypto.com

Buying CAKE and other DeFi tokens is straightforward with the Crypto.com App. Users can use supported fiat currencies like USD, EUR, and GBP.

Below is a step-by-step guide to getting started:

1. Download the Crypto.com App, available on the Apple App Store and Google Play.
   
2. Complete the sign-up process. On-screen prompts are at hand to guide users.
   
3. Funds deposited using bank transfers will usually clear within one to three business days. For faster access, users can also fund their account using Apple Pay or a prepaid/credit card. Please note that processing times and availability may vary depending on card issuer and other factors.
   
4. Once the funds are cleared, users can start buying CAKE, along with large-cap assets like Bitcoin (BTC) and Ethereum (ETH), plus an extensive collection of altcoins and meme coins.

Users can also explore advanced trading tools and track crypto holdings directly within the app.

Conclusion

PancakeSwap is no longer just a food-themed DEX. It’s a multi-chain, institution-ready protocol offering capital-efficient trading, gamified staking, and strong tokenomics. With a broad range of yield and AI tools rarely found in a single platform, it remains among the top ranks of DeFi protocols.

Its success now depends on sustaining growth without compromising decentralisation, especially as it navigates increasing competition and shifting user expectations in the next chapter of DeFi.

As with any other cryptocurrencies, adding CAKE to portfolios should only be considered after comprehensive risk assessment and proper due diligence. 

Due Diligence and Do Your Own Research

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