Dear Readers. I am loving DeFi. It might be a risky space but it has some academic incentives to dive deep into the rabbit hole! And so far it really paid off (4me). PancakeSwap is hitting a new All-Time-High today. "CAKE"...
...ist the governance token of the DeFi Exchange PancakeSwap.
On the 1st March 2021 I already made a posting about how one can handle that DEX (DEX = Decentralized Exchange). You can find that posting under posting #1352 (Dated: 1st March 2021) >> www.private-investment.at/posts/view/1352
Back in those times (ca. 2 months ago) then PancakeSwap (the governance token: CAKE) was hovering around USD 11.80 >> Since then the chart rocketed with some hickups inbetween...(Price now: ca. 34 USD).
the elder chart above from my posting back then/
In the following paras I want to extract the best parts of an article describing the rise of these Decentralized Exchanges like PancakeSwap or UniSwap; A nice article, which has just recently been released on Coindesk. So let's dig into that topic:
Decentralized finance (DeFi)
...allows strangers on the internet to earn money much the same way bankers do, by earning fees on financial services. In most cases, people do that by providing liquidity. Those investors (like Ralph Gollner) "stake," or lend, digital currencies, not dollars or euros or yen, and they are lending the digital currencies to apps rather than to people or companies. One set of apps with the most need for liquidity and the heaviest flow of transactions is decentralized exchanges (DEXs), particularly automated market makers (AMMs) led by Uniswap.
But how does anyone decide which AMM is the right one for their funds?
Joining a particular DeFi community can mean much more than just putting up funds. It can also mean participating in discussions, helping out new users, voting on governance decisions and even writing suggested improvements for a software protocol’s code base.
It’s surprising that the industry has even reached this point. Not so long ago, there was doubt about how practical it was to decentralize cryptocurrency exchanges.
AMMs have become a respectable business on their own. Even if they never grew from here, it would be worthwhile to a lot of people to be part of such a market. But they do need to entice investors to join.
Facebook might be terrible, but we all keep opening the app because everyone is there. That's also why no one leaves, even though we all wish we could. One could say Facebook has social liquidity...
Liquidity, Liquidity, LIQUIDITY
...DEXs work much the same way. The exchanges work better the more liquidity they have on hand, and so they compete as much on providing attractive deals for liquidity providers (LPs) as they do on being affordable and easy for traders.
THIS IS DeFi:
Once you are in, you are part of it. It's not like buying some Enron stock and seeing where it goes. Backers of these platforms have a voice, and they work best when a lot of them use it.
Each of these applications is part of a specific ecosystem, and each represents a specific vision of the future. Potential backers of such protocols should understand that vision and decide whether to buy it. That's where, I hope, this post - in its whole length to be read under the link below- can help.
Please also read this great article: The Rise of the AMMs >>
Now to my favourite PANCAKE SWAP
PancakeSwap, like SushiSwap, is a fork of Uniswap, built for Binance Smart Chain (BSC), which uses the BNB token much in the same way Ethereum uses ETH. BSC is more centralized, with only 21 validators leading the chain, using a system much like EOS. That makes BSC faster and cheaper to use, but considerably more vulnerable to tampering by third parties. So let's please keep this Risk-factor in mind!
BSC is compatible with Ethereum's code logic, making it easy for forks of successful Ethereum projects to be run on BSC. PancakeSwap is a case in point.
As with the other AMMs, PancakeSwap liquidity providers earn fees on trades within pools they have participated in. Since volumes on PancakeSwap are very high and transaction fees are much lower, that should create more activity that will enable participants to generate more yield.
Like on SushiSwap, LPs who stake their positions will earn a governance token, CAKE...
Please finish this article by reading the whole original Coindesk-posting here:
Disclaimer/Disclosure: Ralph Gollner hereby discloses that he directly owns also other digital assets/currencies like PancakeSwap (CAKE), Binance coin (BNB), Bitcoin (BTC), Ethereum (ETH) and other as per 26th April 2021.
Disclaimer/Hinweis nach §34 WPHG zur Begründung möglicher Interessenkonflikte:
PancakeSwap (CAKE), Binance coin (BNB), Bitcoin (BTC), Ethereum (ETH), und Andere befinden sich aktuell im "Echt-Depot" von Mag. Ralph Gollner - per 26. April 2021