In this episode, we are introducing some basic features and concepts: Swap, StableSwap, Liquidity, and Market Maker Integration.
[V3 Update]
**WHAT’S NEW FOR SWAP & TRADERS? UP TO 25x LOWER TRADING FEES **
One of the most exciting features of PancakeSwap v3 is the significantly reduced trading fees. V3 will have four different trading fee tiers, 0.01%, 0.05%, 0.25%, and 1%, compared to V2’s 0.25%. The multi-tier fees bring traders the lowest trading fees in the Industry
V3 Trading Fee Tiers Breakdown:
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.
Click HERE to know more about v3
Swap
Swap refers to the exchange of one cryptocurrency for another. The exchange allows users to trade cryptocurrency pairs without intermediaries, it saves time, reduces fees, and makes it easier to manage your portfolio.
1. Go to the Trade page and select Swap.
2. Choose the token you wish to trade from the dropdown menu in the upper token section.
3. Regardless of which token you choose, you will need to ensure sufficient balance in your wallet. Your balance is displayed above the token dropdown menu.
4. Choose the currency token you want to trade to in the lower token section. Next, decide how much currency you want to exchange and input the amount in the upper token box.
5. Our system will choose the best router for you.
6. Double-check the inputted details, and click the Swap button when ready.
**V3 updates: how to see the trading fees when you swap on BNB Chain & Ethereum **
- Choose BNB Chain or Ethereum, Click "Trade"> "Swap"
- You will see your trading fees before you Swap. Your trading fee is affected by the type of liquidity pool your trade is being routed through. In V3, you have more options to choose your own route combo!
- Check route details by clicking the magnifier icon in "Route" section
StableSwap
Similar to Swap, StableSwap on PancakeSwap is a feature to trade stable pairs with a lower slippage. It is designed to swap specific assets that are priced closely – such as USD stablecoins (e.g. BUSD, USDT, HAY etc) or liquid staking tokens (e.g. stkBNB).
StableSwap adds a linear invariant constant sum curve (x+y=k) on top of the constant product formula (x*y=k) to keep prices more equal as long as the liquidity pool is not extremely unbalanced. As a result, because StableSwaps are restricted to similarly priced assets, impermanent loss is not as significant of a concern, and the slippage is lower than normal AMM which just uses the constant product formula.
When you conduct a Swap (trade) on the StableSwap, you will pay lower trading fees than the usual 0.25% on normal PancakeSwap AMM. The fee attribution is broken down as follows:
- 50% to the LP as rewards
- 40% to CAKE buyback and burn
- 10% to the PancakeSwap Treasury
You can visit here to learn about the fees for pairs .
Liquidity
Liquidity is a crucial concept in decentralized finance (DeFi), which refers to the amount of assets available for trading in a particular pool. Users can contribute their tokens to a liquidity pool to help provide liquidity to the platform. In exchange, they receive liquidity provider (LP) tokens, which represent their share of the pool and entitle them to a portion of the trading fees generated by that pool.
In v3, liquidity positions become non-fungible liquidity positions - therefore you can create multiple liquidity positions with their own settings in a single trading pair. For example, one with a wider price range, and one with a narrower range. Liquidity providers can concentrate their liquidity within a particular price range, hence you can receive the same amount of trading fee while putting less capital to the liquidity pool. Liquidity providers can select among four trading fee tiers when they provide liquidity (0.01%, 0.05%, 0.25%, and 1%). To know more about v3, click HERE.
**How to add and remove Liquidity in v3
**
- Visit the Liquidity page & click the “Add Liquidity” button.
- Choose the two tokens in the trading pair you want to add liquidity. Here we are going to use ETH and USDC as an example.
- It will automatically choose the most popular trading fee tier and configure the price range for you. For StableSwap liquidity pools, the fee rate depends on the individual pool configurations. Please check the “Fee” section for more detail.
- Confirm you are adding V3 liquidity by looking for the “V3 LP” label.
- You can review the price range on the right-hand side displays. And make adjustments if necessary. Please choose a suitable fee tier as out-of-range positions will NOT earn trading fees.
- Enter an amount on one of the tokens under “Deposit Amount”, or simply use the** “MAX” **button.
- Click the “Enable USDC” button. If you are adding liquidity against tokens other than ETH, you need to enable both tokens.
- The “Add” button will then light up. Click to proceed.
- A new pop-up window will appear to preview your liquidity position. If everything looks good, click “Add” again to proceed.
- You will see your new liquidity position on the “My Liquidity” page. Click to check out the details.
Removing liquidity
- Visit the Liquidity page & click the “Add Liquidity” button
- Click on the position you want to remove liquidity from under “Your Liquidity".
- Click “Remove”. A new window will appear.
- Use the buttons or slider to choose how much liquidity you want to remove. Choose “Max” to remove.
- You will receive two of the tokens from your pair. Your remaining liquidity value will be updated.
Some tips about v3 Liquidity Pools
- Reuse positions with the same setting to save on gas
- Choose the optimal price range to control impermanent loss
- Increase or decrease liquidity amount anytime
- Less clutter by clicking "hide closed positions"
Market Maker Integration
Market Maker Integration is a feature in PancakeSwap that uses an automated market maker (AMM) system to determine the exchange rate between cryptocurrencies. This system is designed to be flexible and responsive to changes in market conditions, providing users with a seamless and automated trading experience.
By using an AMM system, PancakeSwap is able to offer trustless trading and sufficient liquidity without intermediaries. PancakeSwap is now integrated with market makers on Ethereum and BNB Smart Chain to help traders execute trades at a lower cost, and the kitchen is exploring other chains.
Market makers play a crucial role in operation especially in two scenarios.
(1) When PancakeSwap already has liquidity for a given token through an automated market maker (AMM) pool. In this case, market makers are asked to provide a quote for the same trade, and PancakeSwap's smart router routes the trade to the AMM or the market makers, depending on which source provides the best price.
(2) When there are no existing AMM liquidity pools available. In such a case, the smart router automatically routes the trade to the market makers. However, this does not prevent projects from setting up their AMM liquidity pools later and working with PancakeSwap to maintain liquidity.
PancakeSwap does not charge traders any fees , however, we receive 0.05% trading fees on ETH / 0.0375% on BSC from whitelisted market makers for volumes which are executed by them. PancakeSwap receives a reduced 0.01% trading fee if the trades executed are between stablecoin pairs. Please refer to the fee breakdown below:
Assets currently supported
The following assets are currently supported and may increase or decrease depending on the market maker(s); visit here for more details (https://docs.pancakeswap.finance/products/pancakeswap-exchange/market-maker-integration)
On Ethereum
Majors: WETH, WBTC Stablecoins: USDT, USDC, DAI, BUSD Other popular ERC-20 assets: MATIC, SAND, DYDX, CRV, MANA, SUSHI, FTM, LINK, APE, CVX, STG, LDO, AAVE, MKR, UNI, SNX
On BNB Smart Chain:
Majors: BNB, ETH, BTCB
We hope you enjoyed learning about the basic features of PancakeSwap in this episode of PancakeSwap Academy.
If you're interested in trading stable pairs, make sure to check out our video tutorial: https://www.youtube.com/watch?v=TbjJvpzxHcU on StableSwap, which will guide you through the process step-by-step. Don't forget to hang around for our next episode where we'll dish out even more cool features of PancakeSwap!
Thanks for joining us! See you next time!
The Chefs 🐰