Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
Since launching in 2020, PancakeSwap has been a top 3 cross-chain decentralized exchange, and notably the fiercest contender to challenging Uniswap’s dominance among DEXs. In just the past 7 days, PancakeSwap has processed ~40% of the trade volume of Uniswap and remains #2 in cross-chain total trade volume.
While PancakeSwap was originally a fork of Uniswap V2, it has evolved into much more, an all-in-one DeFi super-app with an AMM, concentrated LPs, farming, liquid staking, trading competitions, no-loss lotteries, perps trading, initial farm offerings, and even a web3 game called Pancake Protectors!
Recently, PancakeSwap made a strategic decision to expand aggressively beyond its home chain of BSC. On BSC, PancakeSwap powered $221M of $243M in DEX trade volume in just the last 24 hours. Although PancakeSwap is synonymous with with BSC, they’re not quitting on BSC. The CoFounder Chef Mochi and the PancakeSwap CAKE holder community have simply demonstrated an alignment in growing the protocol’s DEX dominance to new Ethereum L2 chains as well as non-EVM chains like Aptos. As a result in 2023, PancakeSwap has launched its automated market maker (AMM) on the following Ethereum L2s:
- Polygon zkEVM
- zkSync Era
- Arbitrum
- Linea
- Base
Its most recent L2 launch on Base, a collaborative effort between Coinbase and Optimism, has allowed PancakeSwap to introduce their well known brand to a new class of L2 users. As of this writing, PancakeSwap is ranked #4 in 7-day trade volume on Base, according to DeFiLlama.
Today, I’ll show how I might earn yield with a simple PancakeSwap stablecoin LP!
How to Earn Up to 22% APR with Stablecoin LPs on PancakeSwap
Before we get started, please be aware of these risks.
- Smart contract risk in PancakeSwap
- Oracle manipulation risk
- Front-end spoof attack on app app frontend
- An economic design exploit in the design of PancakeSwap
- There remain centralized admin controls in the Base L2 which would prevent users from withdrawing funds
- Stablecoins like USDC can depeg
- Colluding signers on any multisig
Here’s how I get started!
- First, I check out the available Farms and I identify the USDC-USDbC LP earning a net 22.34% APR thanks to trading fees + CAKE rewards.
- Let’s assume I need to bridge some USDC to Base. I can use Bungee to bridge from any supported chain or L2. In this example below, let’s assume I already have ETH in my Base wallet for paying fees so now I need to send USDC from Ethereum Mainnet to Base.
- Once my USDC have arrived on Base, I can go to the USDC-USDbC LP and click the Add Liquidity, specify how much USDC I might deposit, and the UI will indicate how much USDbC I need to swap for so I can deposit the proper ratio. Then, I can go trade for that USDbC here on PancakeSwap under Trade -> Earn.
- I return to the Add Liquidity option for the USDC-USDbC LP here. I can specify how much of either token and the app auto-fills the other amount to maintain the LP ratio. I follow the prompts to Approve and Deposit both tokens.
- Lastly, I return to the Farms tab and find the corresponding USDC-USDbC LP and stake the LP tokens. It should require 2…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
