Coin Vs. Coin: UNI/CAKE
Two of the most popular decentralized exchanges (DEX) are Uniswap and PancakeSwap. Each of these exchanges has its own liquidity provider token and each is known for its simplicity and services to trade not only crypto but digital assets like NFTs as well. Both Uniswap and PancakeSwap can be great places for investors to lend, stake, and borrow cryptocurrencies.
What is Uniswap?
Uniswap (UNI) is a decentralized trading protocol built on Ethereum and is used for swapping ERC20 tokens. Uniswap is considered a ‘public good’ and has some very unique features that set it apart from most other DEXs.
Unlike many exchange platforms, Uniswap does not collect fees for executing trades, thereby removing the need for middlemen. Moreover, as many exchanges match buyers and sellers before determining a price, Uniswap is famous for using an algorithm and a pool of tokens to match buyers and sellers: x * y = k where x and y represent coin quantities in the liquidity pool and k is the asset being traded.
The most differentiating aspect of Uniswap is its pricing mechanism known as the Constant Product Market Maker Model. The exchange will accept any token on the crypto markets – no permission required – to trade its ERC20 token, for an equivalent value of ETH. Users simply connect their wallet, such as Coinbase or MetaMask, to the exchange and can quickly start trading.
What is PancakeSwap?
PancakeSwap (CAKE) is a DEX built on the BNB Chain that enables users to easily swap BEP-20 standard tokens. As DeFi expanded over recent years, Uniswap and SushiSwap quickly became the two market leaders.
However, with the majority of Dapps being built on Ethereum, transaction speeds slowed down and gas fees increased. With those challenges in mind, the founders of PancakeSwap developed the platform on the BNB Chain with a sharp eye on performance and features.
What resulted was an Automated Market Maker (AMM) platform that facilitates trading, farming, and staking. Additionally, PancakeSwap offers trading and staking of NFTs with a Binance-specific protocol. Lotteries are also a feature of PancakeSwap where users can buy lotto tickets with CAKE coins to win NFTs.
Similarities
Uniswap and PancakeSwap automate trades, decreasing risks for all parties involved.
Any crypto coin can be swapped for any other crypto coin on both platforms.
Both have the problem that plagues all DEXs: a lack of liquidity. Not a lot of easily available money is circulating in the exchange to make transactions fast and efficient.
The UNI and CAKE tokens are made for incentivizing liquidity through automated trades.
Both UNI and CAKE are mobile-friendly exchanges through Binance’s Trust Wallet
Differences
Blockchains
Uniswap is built on Ethereum.
PancakeSwap is native to the BNB Chain.
Tokens
Uniswap’s UNI is a governance token.
PancakeSwap’s coin CAKE is a native token.
Gas fees
Uniswap gas fees average 0.0212 ETH ($28.91 at writing)
PancakeSwap is far cheaper at around 0.0010 BNB ($0.29 at writing)
Total Value Locked (TVL)
Uniswap holds $7.6 billion at writing.
PancakeSwap holds $6.5 billion at writing.
User experience (UX)
Uniswap emphasizes simplicity in its processes.
PancakeSwap has more color and a complex menu in its interface.
Final analysis
As with every cryptocurrency during the bear market, UNI and CAKE have been hit hard.
With the NFT market appearing to stall, bitcoin struggling to stay above $20,000, and dormant bitcoin addresses on the rise, the market has every reason to stagnate.
In December of 2021, toward the end of the bull run, UNI and CAKE had a wild ride on the markets before ending the month in roughly the same place they started at.
Image: courtesy, TradingView.com
PancakeSwap is good for beginners because there are lower gas fees and BNB is more affordable than ETH, as of writing. Uniswap is a very streamlined, efficient exchange that is easy to use but does have higher gas fees.
Each investor will have to decide what is best for their portfolio but these aspects factor into the broader investing picture. UNI and CAKE offer a wealth of services, features and options for beginner investors and veteran investors alike to explore exciting new investment opportunities in web3.