The Latest Comparison Between PancakeSwap and Uniswap

The surge of DeFi has ushered in innovative financial paradigms centered around autonomy, speed, and inclusivity—a blend often absent in TradFi.

This transformation is particularly evident in the burgeoning DEX sector, where users actively participate in self-governing markets anchored by blockchain tech.

PancakeSwap and Uniswap are Leadin DEXs

Presently, many decentralized platforms offer users the ability to buy, sell, and leverage crypto assets for passive income through yield farming.

Uniswap stands out as the leading DeFi platform, dominating DEXs for seamless cryptocurrency trading on the Ethereum blockchain. Its distinctive swap interface has become iconic and inspired platforms like Sushi, Pangolin, and Quickswap.

On the other hand, PancakeSwap is a Uniswap counterpart developed on the BNB Chain. It has emerged as Uniswap’s primary competitor, boasting billions in trading volume and liquidity. This guide aims to dissect the strengths and weaknesses of Uniswap and PancakeSwap, offering insights to help users discern which DEX aligns best with their specific needs. In this article, we made a comparison between PancakeSwap and Uniswap.

What is Uniswap?

Uniswap, built on Ethereum, stands as a trailblazing decentralized exchange (DEX) facilitating the exchange of crypto assets without the need for intermediary intervention. Launched in 2018 by Ethereum developer Hayden Adams, Uniswap introduced the Automated Market Maker model (AMM) to the Ethereum community, offering users a groundbreaking approach to trading.

Notably, Uniswap has expanded its reach beyond Ethereum, operating on various blockchains such as Polygon, Optimism, Arbitrum, Base, BNB Chain, Celo, and Avalanche.

In a pivotal moment in 2020, Uniswap outpaced Coinbase’s total trade volume, marking a significant shift in the perception of DEX tech from a novelty to a pivotal force shaping the future of finance. As per its official website, Uniswap has executed over 71 million trades, accumulating an impressive trade volume surpassing $489 billion.

Unlike traditional exchanges reliant on order books, Uniswap leverages an AMM that harnesses liquidity pools and smart contracts to execute trades. Through self-executing smart contracts within liquidity pools, users can place orders on Uniswap, with a nominal platform fee as the cost. Besides, the pricing mechanism driving asset values within liquidity pools is the Constant Product Market Maker (CPMM) model.

Moreover, Uniswap encourages user participation by incentivizing those depositing equivalent token pairs to provide liquidity for the liquidity pools. The Uniswap protocol, described as a public good, operates open-source, allowing transparency and community contributions to the code.

Managed by Uniswap Labs, the project successfully raised over $176 million through two funding rounds. Presently, Uniswap is the 12th largest DeFi protocol, boasting a Total Value Locked (TVL) exceeding $3.68 billion, with a peak TVL surpassing $10 billion in 2021.

How Uniswap Works?

Uniswap employs blockchain-based smart contracts to enable decentralized trading of a wide array of digital assets. The platform exchanges pairs of digital assets utilizing liquidity pools, with smart contracts automatically rebalancing after each trade.

The Uniswap protocol, akin to an electronic ledger, is consistently updated to mirror the ongoing trading activities within the Uniswap community. Operating as a decentralized exchange devoid of central authority, Uniswap functions as an automated market maker. Users engage with the Uniswap decentralized exchange through various avenues:

  1. Create New Markets: Uniswap users can utilize smart contracts to establish new markets for exchanging different pairs of digital assets.
  2. Swap Assets via Existing Markets: Utilizing the platform, users can swap digital assets through decentralized markets already in existence.
  3. Provide Liquidity and Earn Rewards: Users can contribute liquidity by staking their digital assets- refraining from trading or selling. Stakers receive $UNI rewards for their commitment.
  4. Participate in Uniswap Governance: Holders of UNI tokens hold the authority to govern the Uniswap platform, with voting power distributed in proportion to users’ $UNI balances.

To participate in the Uniswap network, users must connect to a compatible digital wallet. Additionally, as the Ethereum platform charges fees for processing Uniswap transactions, users need $ETH to cover any incurred transaction fees.

Features Of Uniswap
  • Uniswap’s AMM model addresses liquidity challenges prevalent in centralized exchanges, providing users with heightened efficiency and convenience.
  • Operating in a decentralized and permissionless fashion, Uniswap eliminates the need for user registration or KYC completion. This approach enables trading on the platform while safeguarding user data and privacy.
  • In contrast to centralized exchanges that control and store users’ private keys or passwords, Uniswap follows a non-custodial model. It means users retain control over private keys and funds in their wallets.
  • The platform introduces its native token, UNI, granting holders the opportunity to engage in decentralized governance through voting and proposing platform development initiatives.
  • Uniswap v3, introduced in 2021, introduced several enhancements, including three fee tiers allowing liquidity providers to adjust profit margins during periods of volatility. Additionally, the platform incorporated layer 2 scaling solutions to reduce fees and enhance transaction throughput.

On June 13, 2023, Uniswap made a significant announcement about its upcoming upgrade, Uniswap v4. This latest version will enhance the platform’s architecture, introducing a “hooks” feature empowering developers to create innovative functionalities such as Time-weighted Average Market Maker (TWAMM) and on-chain limit orders. Notably, v4 pools will now operate through a single contract, effectively reducing the costs associated with pool creation on the platform.

Being a DEX leveraging blockchain tech, Uniswap is generally secure. The smart contracts integrated into the Uniswap platform are designed to be immutable. That said, like any platform, it is not completely immune to potential smart contract vulnerabilities and hacking incidents. Unfortunately, in 2023, Uniswap encountered significant security breaches, leading to losses exceeding $25 million.

This security lapse wasn’t the first time Uniswap faced scrutiny. In November 2022, reports revealed that 97% of crypto projects launched on Uniswap were associated with rug pulls, adding to the platform’s challenges and raising concerns within the crypto community.

What is PancakeSwap?

PancakeSwap is a DEX operating on the BNB Chain, facilitating trading cryptos and tokens directly between users without intermediaries. Leveraging an AMM system, PancakeSwap relies on user-contributed liquidity pools for various token pairs, enabling seamless crypto transactions.

Distinguished as the largest DEX on the BNB Chain, PancakeSwap is a compelling alternative to platforms like Uniswap. Besides, PancakeSwap supports Aptos, Ethereum, Polygon zkEVm, zkSync Era, Arbitrium One, Linea, and Base blockchains.

Furthermore, beyond conventional crypto platform features such as swapping, trading, yield farming, staking, and NFTs, PancakeSwap introduces unique offerings, including Initial Farm Offerings (IFOs), Yield Farms, Syrup Pools, PancakeSwap Lottery, Prediction Markets, and NFT Collectibles.

Launched in September 2020 by an anonymous developer team, the community partly governs PancakeSwap. $CAKE (the native token) holders play a vital role in the governance process, utilizing PancakeSwap’s voting portal to participate in the platform’s development decision-making. The team comprises over a dozen members, with two co-leads, Hops and Thumper, and skilled engineers contributing to PancakeSwap’s growth and innovation.

PancakeSwap’s Market Dynamics

As per its official statistics on its website, PancakeSwap has successfully executed over 17 million trades, accumulating a substantial trade volume exceeding $1.23 million in the last 30 days.

Notably, during an active day in April, PancakeSwap recorded a remarkable 2 million transactions, surpassing the entire Ethereum network, including Uniswap, which managed 1.5 million transactions within the same timeframe.

Interestingly, PancakeSwap, at its zenith, momentarily surpassed Uniswap as the world’s leading decentralized exchange by trading volume. However, recent months have seen a decline in PancakeSwap’s trading activity. The reduction in Ethereum transaction costs has contributed to the increased affordability of Uniswap trading.

PancakeSwap: Origin & Evolution

PancakeSwap commenced its journey by securing over $1 million in a seed round in June 2020. By February 2021, it achieved the milestone of becoming the first billion-dollar project on the BNB Chain. The platform upgraded to version 2 in April 2021 and conducted another seed round in July 2021, amassing $4 million in funds.

A noteworthy aspect is that PancakeSwap is a fork of SushiSwap, sharing an almost identical code base. However, being built on the BNB Chain provides PancakeSwap with advantages such as lower fees and faster transactions than SushiSwap. Additionally, PancakeSwap introduces unique features beyond its predecessor.

During its launch, most DeFi applications were Ethereum-based, setting PancakeSwap apart as it leveraged the BNB Chain. This strategic move offered faster and more cost-effective transactions.

PancakeSwap also differentiated itself by implementing a lower swap fee of 0.2%, whereas standard swap rates at the time were typically 0.3%. These factors contributed to PancakeSwap’s rapid growth in trading volume and total value locked.

Presently, PancakeSwap holds the 20th position among DeFi protocols and leads DeFi protocols on the BNB chain, boasting a TVL exceeding $1.44 billion, according to DeFi Llama. The platform achieved its peak TVL of approximately $7.8 billion during the bullish market conditions in 2021.

How PancakeSwap Works

PancakeSwap operates like Uniswap, employing the AMM system to facilitate seamless swaps using liquidity pools, eliminating the need for intermediaries and traditional order books.

Users can lock their funds within liquidity pools through smart contracts, actively contributing liquidity and, in return, receiving LP Tokens (referred to as FLIP). These LP tokens empower users to reclaim their deposited tokens and a proportionate share of the accumulated trading fees. Importantly, individuals engaging in token trades within these pools are subject to a platform fee. The platform subsequently distributes this fee between the platform treasury and LP token holders.

Beyond the conventional liquidity pools, PancakeSwap introduces high-yield Syrup pools. In these pools, users can stake their CAKE tokens (PancakeSwap’s native token) to garner additional rewards. The CAKE token adheres to the BNB Chain’s BEP-20 token standard, serving governance and utility functions within the PancakeSwap ecosystem.

Features of PancakeSwap
  • PancakeSwap allows users to trade BEP-20 tokens directly from their wallets, ensuring convenience and accessibility.
  • The platform offers diverse products designed to incentivize users through DEX services, a yield farming protocol, special Syrup Pools, Lotteries, and more.
  • PancakeSwap’s IFO program enables projects to launch tokens, leveraging the decentralized platform and its user base.
  • PancakeSwap products incorporate an inherent deflationary mechanism to regulate the circulation and inflation of CAKE tokens.
  • Like Uniswap, PancakeSwap adopts a user-friendly approach, eliminating the need for account creation or document submission for trading and platform utilization.
  • Participating in PancakeSwap governance is open to all, allowing users to submit proposals and vote on platform changes and improvements easily.
  • Furthermore, PancakeSwap extends its offerings to an NFT Marketplace, facilitating the buying and selling of PancakeSwap and other BNB collectibles. Users can also craft personalized NFT profiles, share them with friends, and engage with various teams within the marketplace.

In April 2023, PancakeSwap unveiled its Version 3, applicable to both Ethereum and the BNB chain. The primary objective behind this release is to elevate the platform’s performance and capitalize on efficiency.

Notable enhancements include a 25-fold reduction in trading fees compared to its predecessor, Version 2. Additionally, PancakeSwap introduced novel features such as a VIP trading reward program and a position manager, further enriching the user experience.

Overview
Uniswap PancakeSwap
Launch Date November 2018 September 2020
Founder Hayden Adams Anonymous
Supported Chains Ethereum, Polygon, Optimism, Arbitrum, Base, BNB Chain, Celo, and Avalanche BNB Chain, Aptos, Ethereum, Polygon zkEVm, zkSync Era, Arbitrium One, Linea, and Base
Native Token $UNI $CAKE
Market Cap $3.9 billion $490 million
Token Type Governance Utility
Circulating Supply 753.77 million 229 million
Max Supply 1 billion 750 million
Consensus Method Proof of Stake (PoS) Proof of Staked Authority (PoSA)
Interface fees 0.15% 0.00%
Swap fees 0.05% 0.01%
Key Features Swap feature, Trade NFTs, Liquidity pools. Spot trading, Yield farming, Syrup Pools, Prediction market, Lottery, Perpetual futures trading, Initial farm offering (IFO), NFTs trading.
Security Publicly viewable core smart contracts, multiple security audits, internal code reviews, and bug bounty programs. Public code and smart contracts, multiple security audits, and contracts verified on BSCScan.
Mobile App Yes Yes
Customer Support Users can contact customer service through https://uniswap.org/terms-of-service Users can contact customer service through https://docs.pancakeswap.finance/contact-us/telegram, such as Telegram Group, Twitter, and Instagram
Conclusion

As Uniswap and PancakeSwap extend their reach beyond their original blockchains, they find themselves encroaching on each other’s territories. In the early stages of DeFi, the landscape was simpler—Uniswap was the go-to choice for Ethereum transactions. At the same time, PancakeSwap catered to those trading on the BNB Chain, boasting distinctive token offerings.

However, the dynamics have shifted, with Uniswap now operating on the BNB Chain and PancakeSwap making its presence felt on Ethereum. The once-distinct exchanges are now direct competitors, vying for user attention.

Source: Dune

Currently, Uniswap maintains its status as the most widely used decentralized exchange, commanding nearly 64% of the market share by trade volume. PancakeSwap is the second-most popular DEX, claiming a 20% market share.

Source: Dune

Yet, there have been instances in the past year where PancakeSwap’s market share exceeded 30%, while Uniswap’s dipped below 50%.

The landscape of DeFi is bound to evolve, especially with the increasing demand for multichain DeFi solutions. Alternative blockchain deployments are emerging as a crucial battleground for user acquisition.

While Uniswap currently holds the top spot, it’s essential to recognize that PancakeSwap or another competitor could surpass the market leader. The history of crypto trading has witnessed significant transformations driven by the rise and fall of various exchanges. The fall of former giants like Mt. Gox and FTX is a lesson—no platform is immune to losing its dominance, and the next contender is always ready to seize the opportunity.

Disclaimer
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted levels of risk tolerance of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments so please do your due diligence. Copyright Altcoin Buzz Pte Ltd.

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