How does pancakeswap work?

 Automated Market Maker

An Automated Market Maker is a decentralized exchange protocol that doesn't need an order book but relies on the mathematical formula to set the price for the assets. The price of the assets is fixed according to the pricing algorithms. This pricing formula can vary according to the DEX protocols.As PancakeSwap works on the AMM model, which means the users can trade their digital assets on the platform at any time even if their order book isn't matched with anyone else.

Instead, the trading occurs against liquidity pools.

These liquidity pools are filled with user's funds. The users deposit those funds into the pools just to receive a liquidity provider token or LP Token in return. These LP tokens can be used to reclaim shares and trading fees.So, in short, anyone can trade BEP-20 tokens or add liquidity to PancakeSwap and earn LP tokens as rewards.

These LP tokens are in several ways. For Example: if you add BUSD and BNB to the pool, you will receive BUSD-BNB LP tokens as rewards in return and For BETH and ETH deposits, you will get BETH-ETH LP tokens in return.

Business Benefits of launching DeFi Protocol like PancakeSwap

Listed here are the benefits of creating a DeFi based exchange like PancakeSwap.

Less Initial Investment

Generate High ROI

Huge Liquidity at Launch

Eliminates middleman

Go with DeFi trends

Fast Brand Identification and visibility

100% Guaranteed Trading Volume

No manpower required and more.

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