Introducing PancakeSwap V3: A More Efficient and User-Friendly DEX on BNB Chain and Ethereum
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Chef’s choice
2023-04-03

Great news, ev3ryone! PancakeSwap V3 is now officially LIVE on both BNB Chain and Ethereum!

PancakeSwap V3 offers the lowest fees in the industry for traders, increased fee returns for liquidity providers, and new tools that make the user experience even more seamless and user-friendly. With this upgrade, PancakeSwap is now the most efficient, flexible, and user-friendly DEX available in the industry. We are thrilled to announce that this powerful upgrade is now available on both BNB Chain and Ethereum, and look forward to serving more users with the best experience possible.

Here are some highlights of PancakeSwap V3:

  • Up to 25x lower trading fees for traders as compared to V2
  • Many times more fee earnings with the same amount of deposits for liquidity providers
  • Up to 4000x higher capital efficiency, allowing you to earn with ease and watch your profits soar
  • A new V3 “VIP” Trading Rewards Program (Coming Soon)
  • Position Manager Feature (Coming Soon)

WHAT’S NEW IN V3: CAPITAL EFFICIENCY

One of the key aspects of PancakeSwap V3 is capital efficiency. In V2, liquidity provided by LPs was distributed uniformly along the entire price curve between 0 to infinity. This approach made capital inefficient since most assets usually trade within certain price ranges. This inefficiency was particularly visible in pools with stablecoin pairs that trade within a very narrow range, with most liquidity remaining unused.

With V3, liquidity providers can now “concentrate” their capital to smaller price intervals, i.e. choose a custom price range when providing liquidity. By doing so, LPs are able to “concentrate” their capital in ranges where most of the trading occurs, thereby making their money work harder for them. This is especially beneficial in stablecoin pools, where two assets hardly change in price in relation to each other and the capital multiplier can be up to 4000x. In addition, PancakeSwap V3 is built on top of Uniswap V3 with added refinements and improvements. As such it is also compatible with tools built for Uniswap V3. Read on to learn what this means and how it works for Swap, Liquidity, and Farm.

WHAT’S NEW FOR SWAP & TRADERS: UP TO 25x LOWER TRADING FEES

1. Multi-Tier Fees Bring Traders the Lowest Trading Fees in the Industry

V3 will have four different trading fee tiers, 0.01%, 0.05%, 0.25%, and 1%, compared to V2’s 0.25%.

V3 Trading Fee Tiers Breakdown:

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For example, Twinkle is a trader and wants to trade USDT for USDC. Assuming the price is 1:1 and trading slippage is negligible:

-In PancakeSwap V2: the trading fee is fixed at 0.25%. So when Twinkle trades 1000 USDT for USDC, a 2.5 USDT is charged as the trading fee. The amount of USDC Twinkle received by Twinkle will be 997.5.

-In PancakeSwap V3: when Twinkle trades 1000 USDT for USDC, if the most popular trading fee tier is 0.01% (as is the case for most stable pairs), then only 0.1 USDT is charged as the trading fee. The amount of USDC T received by Twinkle will be 999.9.

-Trading Fees 0.01%: For assets such as stable pairs, where prices are expected to match, the impermanent loss is low, and traders and LPs typically agree on the lowest fee tiers. This is the example of USDT/USDC above.

-Trading Fees 0.05%: For assets with higher impermanent loss or less robust liquidity, traders and LPs may agree on a higher fee tier, providing more fee revenue and incentive for LPs to provide liquidity and overcome impermanent loss. This fee tier is intended for assets that are volatile, but still relatively well-traded, or expected to have a higher impermanent loss.

-Trading Fees 0.25%: This fee tier is for more exotic or less frequently traded assets, where the higher fee provides traders access to these assets while still allowing LPs to earn sufficient fee revenue.

-Trading Fees 1%: The highest fee tier is intended for assets that are traded the least frequently or have an even higher impermanent loss. The higher fee tier provides a great incentive for LPs to provide liquidity and overcome impermanent loss, while still enabling traders to access these assets.

It is important to note that these fee tiers are not mutually exclusive as each token pair can have a liquidity pool for each fee tier. However, asset pairs will tend to gravitate towards the fee tier where incentives for both LPs and traders more closely align.

In summary, the different fee tiers exist to provide a balance between traders paying the lowest fee tier while still incentivizing the highest possible liquidity from LPs.

2. Capital Efficient Trading and Lower Trading Slippage

V3 also offers capital-efficient trading and lower trading slippage by “concentrating” the capital on the most actively traded price range. This ensures more liquidity, less slippage, and greater capital preservation for traders, regardless of the fee tier.

3. Utilizes Every Liquidity Source

A new feature in V3, the improved smart router brings an overall improvement to the trading engine by adding split routing capability and the ability to utilize all possible liquidity in the protocol. The new smart router intelligently finds the best trading route by utilizing liquidity from PancakeSwap V3, V2 and StableSwap with multihops and split routing capabilities. On top of that, it will also utilize liquidity provided by the Market Maker integration to provide the best deal for traders. Users will have the flexibility to customize or disable certain liquidity sources if they do not want a trade to route through them.

4. Advanced Built-in Limit Order (Coming Soon)

V3 currently supports native limit orders by creating ranged liquidity positions, and we will continue to add more improvements in order to make the experience of Limit Order even more seamless on V3.

WHAT’S NEW FOR LIQUIDITY & LPs: EARN MANY TIMES MORE ON YOUR DEPOSITS

V3 provides liquidity providers with more strategic placement options to maximize fee earnings. With multiple fee tiers, LPs are compensated based on the degree of risk they take on and have more control over the price ranges where their capital is allocated.

1. Improved Liquidity Provisioning:

More Flexibility, More Choice, and More Earnings

V3’s capital efficiency allows LPs to focus their assets on specific price ranges, resulting in a more rewarding and flexible liquidity provisioning experience. Key features include:

Customizable Price Range: LPs can select narrow price ranges, which generally result in higher earnings. LPs can expect to earn many times more on the same amount of deposits.

Flexibility of Fee Tiers for the Same Token Pair: LPs can choose from multiple trading fees tiers (0.01%, 0.05%, 0.25%, and 1%) when providing liquidity for the same token pair. For instance, LPs can provide liquidity for a CAKE-BNB trading pair with either a 0.25% or 0.05% trading fee rate, depending on which fee tier offers a better deal and attracts more trading volume.

Non-Fungible Liquidity Positions: Each liquidity position has a unique ID based on its configurations, such as price range. Therefore, LPs can create and maintain multiple positions for the same trading pair but with different configurations and liquidity amounts.

Overall, V3 provides LPs with an improved liquidity provisioning experience that offers more choice and flexibility, and the opportunity to earn many times more on their deposits.

2. Improved Trading Fee Rewards

Thanks to increased capital efficiency and customization options, liquidity providers can earn many times more trading fee rewards on the same deposit amount in V3 compared to V2. Additionally, liquidity providers can enjoy a capital multiplier of up to 4000x in V3, providing even greater potential for earning rewards.

For example:

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Sunny and Churro both provide liquidity in the CAKE/USDT pool with $1,000 USD worth of token assets, and the current price of CAKE is 5 USDT.

On PancakeSwap v2, Sunny provides liquidity across the entire price range - therefore he deposits all of his $1,000 capital in the form of 500 USDT and 100 CAKE.

On PancakeSwap v3, Churro utilizes the new concentrated capital feature to create a position with a price range of 2 to 12.5 USDT per CAKE. She deposits 185 USDT and 37 CAKE, worth a total of $370. Churro is now able to spend the remaining $630 elsewhere, like locking CAKE in the Syrup pool to enjoy high CAKE yield while receiving a series of PancakeSwap ecosystem benefits.

As long as CAKE stays within the price range of 2 to 12.5, both Sunny and Churro will receive the same amount of trading fee rewards while Churro deposited way less capital to the liquidity pool.

3. Useful Utility Upgrades

To provide liquidity providers with an improved user experience, PancakeSwap V3 has launched with two built-in tools that help liquidity providers maximize and predict their earnings more easily.

Automatic APR Displays: For every V3 liquidity position, LPs can easily access an APR figure based on live data of liquidity distributions and concentrations, historical volume data, and the position configurations. No need to use another calculator or figure out a third-party tool. V3 has more dynamic APR based on the position configuration and our APR display can respond to the user input and estimate APR automatically.

Improved ROI Calculator: Since V3 is more nuanced than providing liquidity in V2, estimating the yields and impermanent loss figures is important for LPs to adjust their positions. With the ROI calculator, LPs can be as hands-off as they want. Simply click the ROI calculator button in the APR display. This tool makes it easy for LPs to estimate their returns without any complicated or time-consuming calculations.

WHAT’S NEW FOR FARM: HIGHER CAPITAL EFFICIENCY AND MORE REWARDS - STARTING AT APPROXIMATELY 18:00 UTC

In V3, users will still be able to stake their liquidity into the farms to earn even more CAKE rewards.

Note on the CAKE emissions start time: users can stake in V3 farms now and start earning CAKE rewards once CAKE emissions start at approximately 18:00 UTC. Follow along our Twitter for more updates.

Active Liquidity Farming:

V3 introduces active liquidity farming. Farms will only reward CAKE to active liquidity positions whose current prices fall within their price range configurations. With the same amount of underlying tokens, positions with a smaller price range (more concentrations) will have higher relative shares against the whole farm pool and will be rewarded more CAKE. This encourages liquidity concentration around the current trading price and ensures low trading slippage.

Improved Farming Experience: More Flexibility and Rewards In V3, users can stake multiple liquidity positions for the same token pair in the same farm and manage them independently. Plus, users can claim earned trading fee rewards, compound them, or remove liquidity without having to unstake from the Farm.

Liquidity Farming with bCAKE (Coming in Later Q2)

Stay tuned for the return of bCAKE, which will be available to support V3 Farms with even more boosting power!

V3 “VIP” TRADING REWARDS PROGRAM - COMING SOON

The Kitchen is excited to announce the upcoming launch of the Trading Rewards Program, offering our loyal users (VIPs) the opportunity to earn rewards for their trading activity.

How it Works:

  • VIPs will trade to earn from a prize pool to win up to a 5% trading fee rebate.

Qualification Requirements for our VIPs:

  • Locked Cake and NFT Profile: To qualify, users must have a certain amount of locked CAKE and an active Pancake Profile requiring 1.5 CAKE. Stay tuned for more details on the specific amount of locked CAKE required. Click here to learn more on how to get your NFT profile.
  • Minimum trading threshold: Stay tuned for more details on the minimum trading threshold requirement to qualify.

POSITION MANAGER - COMING SOON

PancakeSwap V3 will soon introduce an automatic position managing feature, enabling users to easily deposit liquidity with just one click. This built-in tool eliminates the need for manual calculations or third-party integrations, allowing users to automatically adjust their positions and earn fee rewards while staying within range.

To ensure liquidity providers’ profitability in V3, the Position Manager tool will offer a range of features including single token deposits with ZAP and automatic position management to ensure positions are always in range and farming CAKE. Additionally, it optimizes the position price range to balance between more CAKE farm yielding and stability, while minimizing impermanent loss. It also auto-compounds trading fee rewards without incurring gas fees and maximizes CAKE yields from farms by automatically depositing them into the flexible CAKE pools.

AVAILABLE NOW ON BNB CHAIN AND ETHEREUM

Our commitment to being a user-focused DEX and one-stop-shop for all things DeFi has helped us to become the #1 DEX on both the BNB Chain and Aptos Network. With this V3 upgrade, we’re excited to bring ev3ryone’s favorite D3X to even more users on both BNB Chain and Ethereum. With one of the largest user bases and a very active and supportive community, we aim to serve more users on more chains, introduce our vibrant community to more projects and chains, and become the leading multichain DEX for all.

PANCAKESWAP V3: THE MOST EFFICIENT AND USER-FRIENDLY D3X

The launch of PancakeSwap V3 marks a significant milestone in our journey towards providing the best DeFi experience to our users. With V3’s enhanced capital efficiency and upgraded features, traders can now enjoy a better trading experience with lower fees and reduced slippage. Liquidity providers will also benefit from increased fee returns and a highly rewarding liquidity provisioning experience.

We are committed to user-friendliness and we are excited to see the rewards that V3 will bring to the community. Stay tuned for more exciting announcements in the following days by following us on Twitter. As PancakeSwap continues to be the one-stop shop for everything DeFi, we promise to deliver more exciting developments in the future.

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The Chefs

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