PancakeSwap is decentralised finance for Binance tokens. It is an exchange built on the Binance Smart Chain. You can connect to PancakeSwap using a range of wallets, the most common being Binance browser extension wallet and Metamask.
Disclaimer! Defi has great rewards, but this comes with risks. Some DeFi protocols have suffered exploits in the past. While you earn rewards in Liquidity pools, you can also lose funds due to Impermanent loss. Learn about Impermanent Loss here.
On PancakeSwap you trade against a liquidity pool in what is called an automated market maker (AMM) model.
What is Automated Market Maker (AMM)
An automated market maker (AMM) is a DeFi Exchange (DEX) protocol that prices assets using a mathematical formula.
How to Join a Liquidity Pool
To add liquidity to a pool, you must first send some BNB to your wallet. I use the Binance Smart Chain inside the Binance browser extension wallet. Go to the Farm section and look for Pools you can join.
Once you have decided on the Pool you want to join, go to Exchange inside the Trade section in their menu. Connect your wallet and swap 50 % of your desired amount of BNB to the pair in the liquidity pool you want to add liquidity to. Once you have 50/50 of the pair, go to the liquidity section and click Add Liquidity. Choose the coin pair and add liquidity to the pool.
You will be rewarded with a liquidity pool token specific to the pool you joined. This token can be staked for passive income earnings. To stake your pool token, go back to Farm in the menu. Find your pair and approve the contract.
A pop up window will appear where you can approve the contract for a fee.
Once the contract is approved you can choose the amount of your LP-token you want to stake and confirm it. You can check back on this page to see your earnings.
Your earnings are also displayed on the Home tab. If you are earning passive income from more than one pool, you can see your combined earnings from the front page. You can also Harvest your income as Cake rewards. Cake can easily be liquidated by swapping it into BNB and selling BNB in your exchange.
Once you have staked your LP tokens, you will not see your liquidity pool anymore until you unstake your LP-tokens. Once you unstake your tokens, your liquidity pair will show up again in the liquidity pool.
Syrup Pools in Pancake swap
Once you start earning Cake, you can harvest your cake and stake your Cake as well. Go to the Pools tabe and choose your pool where you can stake your Cake.
You will have to approve cake in your wallet (a popup will appear) and once it is approved, click on the + tab and choose the amount of cake you want to stake. When your cake is staked, you will earn rewards. You can harvest these rewards by clicking on the Harvest tab.