The 2020 DeFi summer legacy is ongoing, as DEX platforms have gained popularity among blockchain believers. Without reliance on a middleman and quick access to high-value projects, DEX’s such as Uniswap, PancakeSwap, and most recently QuickSwap have become paramount in a decentralized future.
Decentralized exchanges reinspect the nature of centralized exchanges, offering more added value through their increased security and accountability. Serviced by the development of smart contracts and aided by annexed oracles, DEX’s surge in popularity resembles the 2017 ICO mania. DEX’s open source nature empowers the community to contribute to a secure ecosystem and expand DeFI usage towards institutional investors.
BSC vs. ETH
Launched on Ethereum, Uniswap is the staple of DeFi across the board. However, Binance Smart Chain’s ‘PancakeSwap’ is a viable contender in the DeFi space, showcasing less price fee resistance. Both Swap DEXs operate in a similar manner, catering to projects released on their network first and synthesizing tokens from other networks to increase the exchange’s liquidity.
Data on Bscan shows that copycat protocols thriving off Ethereum’s notoriety can surpass its performance, at least briefly. In the first 49 days of 2021, the volume on PancakeSwap increased from $37 million to over $1 billion. Furthermore, transactions on BSC average around $8.79 million while Ethereum’s neared $1.57 million on April 22nd.
The popularity of PancakeSwap and BSC is attributed to the shortcomings of Ethereum, including the network’s congestion which necessitates high transaction fees. Still, at the time of writing, Ethereum is running 2,782 dApps, which affects their network fees. PancakeSwap facilitates small-scale investors in participating in yield farming, generating passive income. Moreover, the success of SafeMoon is directly correlated with BSC’s unique selling point, of permissionless access without heightened fees. In that regard, SafeMoon’s success is a double-edged sword for the network, as it can alter investors’ perception of the network.
PancakeSwap benefits from retail support; it fuels DeFi mania and aims for a large turnover from a low threshold. The CAKE token has already increased by over 6,000% in less than six months and new features added to the platform will further increase its usage. Besides completing the network’s most significant burn of over 5 CAKE tokens, PancakeSwap launched the BETA version of Prediction. Adding gamification to the platform serves to incentivize platform preference over competitors. As a result, users can predict the price of BNB over 5 minutes intervals and be rewarded for their achievement.
On the Flipside
CAKE is Cooking Up
Delays in deploying Ethereum updates to amend Uniswap price congestions enable CAKE to gain more of the market cap. However, alternatives are are on the rise; MDEX clutched onto parts of the market, claiming the #1 spot by 24H trading volume.
Although BSC is more centralized, “retail investors don’t actually care that much about decentralization.” according to Jason Choi. The centralization aspect can add more value for institutional investors when DeFi enters mainstream adoption.
CAKE managed to hit an all-time high of $44.18, according to data from CoinMarketCap. The increased use of BNB tokens on the exchange will increase the awareness of both Binance and PancakeSwap. In that regard, CAKE can benefit from a higher spread of influence and increase its momentum to new all-time highs.