Decentralized Finance (De-Fi) is a fast-growing technology with a wide range of financial services in the blockchain. It has led to the rise of decentralized exchanges (DEX) in the financial community. Interest in DEXes has grown to greater heights in the recent past. Each DEX has its unique features and services based on its technical structure.
The top contenders in the DEX community include PancakeSwap, Uniswap and Sushiswap. Uniswap features the largest Ethereum Dapp in the world in terms of market capitalization. Sushiswap, on the other hand, is an automated market maker founded in 2020 and introduced more functionality in the market. PancakeSwap is a relatively new project that garnered much attention in the De-Fi industry. It has the largest Dapp in the Binance Smart Chain and is also used for staking and yield farming BSC.
What Is DeFi?
Short for Decentralized finance, DeFi is an emerging technology rooted in secure distributed ledgers similar to those used by cryptocurrencies. DeFi aims to eliminate the rules in centralized financial institutions like brokerages and banks that consumers rely on to get financial and capital services. DeFi challenges centralized exchanges and empowers users with peer-to-peer digital exchanges.
DeFi does not charge the fees charged by financial companies and banks for their services. Users have a secure digital wallet to transfer their funds within minutes. On top of that, anyone with an internet connection can use DeFi regardless of their geographical location in the world.
Comparison of PancakeSwap, Uniswap, and SushiSwap
|0.25% fee||0.01%, 0.05%, 0.3% (most common), or 1% fee||0.3% fee|
|Easy||Complex||Easy to use|
|Token Usage||Profit from liquidity pools and staking||Liquidity and voting on governance (Governance token)||
Voting for governance (Governance token) and liquidity.
|Security||Very secure||Very secure||
PankcakeSwap claims to be the most popular DEX platform, with over 2.8 million users and over $9.9 total value locked (TVL). The BSC (Binance Smart Chain) powered the platform, which utilizes the automated market maker (AMM) model to fulfill its orders. PancakeSwap replaces the order book with a liquidity pool.
Its latest PancakeSwap V2 featured 1,425 tokens you can trade on decentralized exchanges. Users interact with the PancakeSwap Syrup Pools to receive an L.P. token, FLIP, representing their share in the pool. The tokens are also necessary for removing their share from the pool.
Additionally, users can use the token to farm two tokens, SYRUP and Cake, which doubles as a governance token and a utility token. The platform runs on BSC, so the tokens have to adhere to the platform’s BEP-20 token standard. PancakeSwap also offers on-chain games to add to its vibrant and playful nature. Users participate in price prediction of the BNB or can enter the lottery and win prizes in BNB.
PancakeSwap also allows traders to win NFTs which can later be exchanged for CAKE tokens. Like in most decentralized exchanges, all traders can trade crypto without an intermediary.
- Built for Binance Smart Chain (BSC)
- Around 1500 token pairs on the decentralized exchanges
- It’s native token and governance token in CAKE
- On-chain games and price prediction
- NFT Marketplace
- No gas fees: Faster transactions and low fees than other Ethereum-based Decentralized finance platforms
- It’s an automated market maker which relies on the use of smart contracts to carry out transactions
- Allows users to trade in a wide range of digital assets against a variety of liquidity pools while collecting yields
- Featured 40 CAKE reward per block
- Verified to ensure legitimacy and security by CertiK
Pros & Cons
- Lower trading fees compared to other Dexes (decentralized exchanges)
- Earn a wide variety of NFTs
- Yields range from 23.52% to 378%, which is much higher than any other exchanges
- Lottery entry with the prize of 50% of the lottery pool
- BEP20 tokens can be exchanged on the PancakeSwap
- Users can develop their projects on the BSC community
- Featured a complicated staking process
- Not suitable for beginners
- It does not have a native wallet and features a complicated BSC process
Uniswap is a popular Ethereum-based DEX that employs an AMM model with liquidity pools rather than order books. It also has L.P. tokens for liquidity providers. It is also the mother chain to PancakeSwap, but it uses the original Ethereum blockchain rather than BSC. Uniswap features one of the most successful DeFi protocols, with most DEXs borrowing features from the platform.
Its AMM model eliminates the need for a partner on the other side of a buy or sells order to complete a trade. It also means less trading time on the DEX with this model. Consequently, it removes the need to go through the KYC (Know Your Customer) procedures giving access to decentralized swapping to more people. Uniswap has reported over $6.3 billion in TVL, with a protocol boasting over 1.5 million all-time users and $386 billion in trade volume.
- Simple UI for easy access
- Broad token selection than other smaller DEXs
- Deeper liquidity pool for less price volatility
- NFT aggregator with searchable assortment
- Customer support via discord or ticket system
- Flat fee of 0.3% on each crypto swap
- Allows liquidity farming to earn yield by creating digital asset pairs
- No limits on transactions using individual wallets
- No mobile app for swapping crypto assets
- No custody of user assets, no insurance against loss or responsibility for lost cryptocurrency
Pros and Cons
- Low-cost trade
- Easy-to-use interface
- No AML or KYC requirements
- Trade and earn by providing liquidity
- Multiple blockchain networks support it
- High gas fees on the blockchain network
- The platform can be intimidating for beginners
- High fees when purchasing through moon pay
Sushiswap entered the market in 2020. It is an automated market maker. Its main goal was to take care of all the problems that Uniswap users were encountering. Sushiswap has a community governance mechanism as its major upgrade from other DEXs in the market. This feature allows users to participate in the direction of their protocol.
The platform also introduces more functionality to the market and allows users to access a wide variety of ways to earn a positive income with less risk. Sushiswap supports farming and staking protocols. The platform’s protocol lets you stake your sushi and receive xSushi in return. You can later stake the xsushi in a sushi pool to earn rewards for the liquidity providers. All xSushi stakes gain a percentage of the fees from the DEX.
- Community governance for xSushi token holders
- Liquidity options for users
- Kashi lending market to earn interest and fund margin trades
- Accessible to new users with basic understanding
- Staking for sushi tokens to earn a share of trading fees
- Incentivized Onsen pools for more liquidity in popular/new markets
Pros and Cons
- Users maintain their ownership of their assets
- The platform is easy to use and navigate
- The platform has optimized the platform for its users
- Sushiswap allows its liquidity providers to earn interest and rewards
- It is limited to tokens on the Ethereum blockchain
- Technology lags when compared to other competitors
- The rewards and interest structure is complicated for a basic user
Factors to Consider While Choosing a Decentralized Exchange
DEXs vary in terms of their protocols, user experience, currencies supported, fees and customer support. When choosing a suitable exchange, you must consider your trading needs and do thorough research while comparing the features of the different DEXs available in the market. Here are some of the vital factors that you need to consider when deciding the platform of your choice:
1. The Security Features
Some DEXs allow you to link your hardware wallet and software wallet direct to your trading contract. Ensure you understand all the security features a platform has before settling for one. This will ensure that your funds are protected at all times.
2. Ease of Use
DEXs often have a steep learning curve and can be hard to understand for most people, especially those new to the space. Make sure you test out each platform’s user interface to learn its usability and ease of use.
3. The Onboarding Process
How fast and easy is the onboarding process? How long does it take to register and create an account, and what details do you need to provide to complete the registration process?
4. The Available Currency on The Exchange
It is essential to ensure that the DEX of your choice supports all your desired tokens and coins. Make sure you also understand when and how the coins are listed.
5. Transaction Fees
Many exchanges make money on the spread, which is the difference between the currency pair’s buy and sell prices. Make sure you check the fine print for the details on the trading fees on the platform and other charges that may apply.
6. Trading Volume
You will need to understand the trading volume of the exchange. Does the DEX of your choice support all your trading needs?
7. Reviews and Reputation
The best way to vet the quality of an exchange is to go through some independent reviews from the community. The reviews will shed light on any problems or concerns that other users when using the exchange of your choice.
Related Questions (FAQs)
1. Is SushiSwap Better Than Uniswap?
While Uniswap is the leading DEX in the world regarding liquidity and user base, SushiSwap offers users voting rights in the protocols. This means Sushiswap listens to the needs and views of the users.
2. Is PancakeSwap Better Than Uniswap?
Uniswap has a broader selection of tokens than PancakeSwap. Uniswap, allow you to exchange ERC-20 tokens such as ERC-721s and NFT. Pancakeswap, on the other hand, supports BSC-based tokens only.
3. Is PancakeSwap Better Than SushiSwap?
PancakeSwap allows users to pay less on their transactions because it is housed on the Binance Smart Chain (BSC). Sushiswap, on the other hand, is built on the Ethereum blockchain, which costs traders more in terms of transaction fees.
4. Why Is PancakeSwap Cheaper Than Uniswap?
Uniswap operates on the Ethereum blockchain, which is significantly more expensive due to the high gas expenses—pancakeSwap is on the BSC, which is significantly less expensive.
5. Why Is There Rivalry Between Uniswap and Pancakeswap?
The DeFi market was disrupted in the summer of 2020 when decentralized exchange rules were rewritten. Uniswap was viewed as the king of DEXs, and most DeFi-focused projects were not taking up as it was before. However, Pancake Swap joined the market and won the unofficial war with increased liquidity by over 1000% in two months.
PancakeSwap’s growth was attributed to the shortcoming of the Ethereum Blockchain, which hosts Uniswap. The blockchain suffers from scalability issues because of the reliance on proof-of-work (PoW). There is often congestion on the platform that increases the transaction cost.
6. Why Is Uniswap Popular?
Uniswap is one of the leading decentralized exchanges in terms of liquidity and user base.
7. What Is A Decentralized Exchange?
A decentralized exchange (DEX) is a cryptocurrency exchange that operates and allows transactions without a central governing authority.
8. Which Is the Best Centralized Exchange?
The best DEX for you only depends on your individual preferences and needs. Researching and assessing the risks once you commit your funds is essential.
9. Is Sushiswap Right for You?
Sushiswap is geared towards being the most accessible decentralized exchange platform that offers great incentives to its users who provide liquidity and engage with its pools. The community-run platform gives users a say in the decision-making of the exchange they invest in.
10. Does Uniswap Allow U.S. Traders?
Yes. U.S. residents can use Uniswap to trade on ERC-20 and provide liquidity. Uniswap is available across the globe as an unregulated and decentralized exchange, except for selected countries that have been geo-blocked.
11. Is Uniswap a Wallet?
Uniswap is not a wallet where you can store your purchased digital assets. Users need to connect their Ethereum hot wallet or hardware before trading crypto on the exchange. Uniswap supports a variety of wallets, including Trust Wallet, Metamask, and Coinbase Wallet.
This is an exciting time to start trading with DEXs if you haven’t already started. They all vary in features, but they aim to make trading crypto assets easier and less expensive for everyone. Before choosing a suitable exchange, do extensive research to ensure they match your trading need and have your desired coins and tokens.
- PancakeSwap, Uniswap and SushiSwap are all decentralized exchanges on the blockchain.
- Uniswap and SushiSwap are on the Ethereum blockchain, while PancakeSwap is on the Binance Smart Chain (BSC).
- PancakesSwap charges lower fees and faster transactions when compared to Sushiswap.
- Sushiswap offers more advanced features, including limit orders and margin trading, while Pancakeswap has a simple user interface ideal for beginners.
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