Table of Contents
- Business Model: What is Pancake Swap? How Does It Work?
- Financials: Let’s Look at the Raw Data
- Tokenomics: Don’t We All Want an Emissions-Free Environment?
- Utility: The Many Ways They Encourage Burning Coins
- Prediction: How Much Will It Be Worth?
Business Model: What is Pancake Swap? How Does It Work?
Pancake Swap is primarily a Decentralized Exchange (DEX) that runs on the Binance Smart Chain (BSC).
You can find 314 coins on the platform directly, but there are many more that you can swap for through Pancake with the direct address.
This is only 1/6th of Uniswap’s coin listings, but large numbers of under $50m projects are running to the BSC to escape Uniswap’s huge transaction costs.
Here’s how easy it is to use PancakeSwap with Trust Wallet:
Financials: Let’s Look at the Raw Data
Pancake Swap has quickly risen to the top 3 DEXs based on 24h volume and tops the list for total visits!
Looking at the trading volume over the last 3 months on Coingecko.com, they are definitely gaining ground quickly on their largest competitor, Uniswap.
They hit their first 9-figure day on Feb 2nd and then hit their first billion dollar day in volume less than 3 weeks later on Feb 19th.
Since that point, they have been pretty steady just shy of a billion a day.
Comparing that to Uniswap’s numbers, Pancake is roughly 25% behind Uni’s daily volume, but where they fall short in $ volume, they are crushing user volume!
The lower transaction costs have driven a massive amount of retail investors over to Pancake Swap because they can afford to buy $100 of coins now that the costs are only $1.50 compared to UNI’s $30 to $100 ETH gas fees.
Based on this data, if Uniswap is properly valued at $16b (which I think they are) then Pancake Swap should be at least $10b in market cap already. And it likely would have been without the DNS issue in mid-March.
Regardless, their numbers look extremely solid considering how young this project is.
Tokenomics: Don’t We All Want an Emissions-Free Environment?
Here’s the one topic that’s creating the most uncertainty among HODLers (long-term holders).
$CAKE was made to be an inflationary coin that aggressively rewards liquidity providers (farming) and staking (SYRUP Pools).
They understood that liquidity is the backbone of a DEX. Less liquidity = less trades = smaller DEX.
The challenge has been balancing the desire of coin holders to have a higher price per coin and the liquidity providers wanting to be rewarded for their participation.
In October 2020, the chefs at Pancake Swap put up a vote for a proposal to cut farming and lottery rewards by 50%.
They again cut farming rewards in late March to appease the HODLers and further cut the emissions rate per block down to 22 CAKE or 360k CAKE per day.
Almost 40% of all CAKE created is now in a dead wallet (burned coins). You can see the raw data on the scanner here.
In my opinion, they accomplished the goal of getting liquidity kicked off and now finding ways to cut the emissions without the blowback of having that liquidity leave.
Utility: The Many Ways They Encourage Burning Coins
The best way to burn coins and control the coin’s inflation is to build ways for users to contribute to the burns.
Pancake Swap has done this through a number of innovative ideas. Here’s their slightly dated write-up about how they are increasing the burn rate.
Lottery: They offer 4-number lottery tickets where 20% of the pot is guaranteed to get burned. Who doesn’t love to gamble every once in a while?
IFO: They offer a launchpad for new coins to raise money half of the raise is CAKE being burned. They’ve burned millions of CAKE through these launches.
Profiles and Teams: They’ve built in challenges that cost 1.5 CAKE to setup your profile for. They recently airdropped NFTs to anyone with a profile.
Anyone who had completed the creation of a PancakeSwap Profile before block #6294750 (about 40 mins ago), can go and claim their team's mascot as an NFT!
— PancakeSwap 🥞 #BSC (@PancakeSwap) April 5, 2021
They are seeding the idea that random rewards could be dropped for participating in the different features that will burn more CAKE.
Seeing them build more ways for users to engage and voluntarily burn CAKE is a great sign that they are tackling the emissions issues without resorting to only taking from the reward pool for supporting the DEX through liquidity.
Prediction: How Much Will It Be Worth?
My prediction is that $CAKE will have a minimum $15b market cap before August.
Here’s my short-term analysis of the technicals for the coin price.
If you want more updates on the coin price, check out the machines over at Token Metrics. Their technical indicators make it super easy to know when to buy and sell.