Introduction to Decentralized Exchanges (and PancakeSwap)
Decentralized exchanges (DEXs) have risen in popularity in the crypto world, with PancakeSwap (PCS) being a notable standout. It operates on the BNB Chain and is regarded as the largest DEX on this blockchain. As of the date of the workshop, it has seen impressive figures such as an All-Time High Liquidity Pool of $8 billion and a daily volume of $6.25 billion. Even in bear markets, it boasts over 150,000 Daily Active Users, which, to give perspective, is significant given that Binance has around 1 million DAUs.
How do they work?
Centralized Exchanges (CEXs) such as Binance or Coinbase generally manage users’ funds and offer trades through a structured internal system, also known as order book. Unlike CEXs, most DEXs don’t use an order book. Instead, they utilize a mechanism called Automated Market Makers (AMM).
Automated Market Makers
In AMM-based DEXs, there aren’t traditional buyers and sellers. Rather, the platform relies on liquidity pools. These pools contain two tokens, and their ratio determines the price of one token in terms of the other. When you want to trade, you interact with these pools directly. If you buy a token, you add to one side of the pool and remove from the other, which adjusts the price according to a set formula. This automatic adjustment based on supply and demand is why they are called “Automated” Market Makers.
When you transact on a DEX, you’re not sending your tokens to the exchange’s wallet. Instead, you’re trading directly from your own wallet, ensuring you maintain control of your assets throughout the process.
Buying and selling $CUT on PancakeSwap
As our esteemed CUT token makes its way onto PancakeSwap, it’s essential for our community members to know how to seamlessly integrate and trade it.
Once you add the address, you will have to confirm the address on the exchange and in your wallet.
And there you have it! With this guide, we’ve lifted the curtain on the basics of PancakeSwap, paving the way for your understanding and participation. As you continue your journey in the cryptocurrency space, understanding the nuances of platforms like this will undoubtedly enhance your experience and proficiency.