Start with a short stack and watch it grow
Last April, I wrote an article inspired by Cake DeFi’s Freezer calculator, which suggested that a $500 investment could grow to $1 million based on their 113% staking APY. My article was somewhat tongue-in-cheek because there’s a pretty big caveat baked in: there’s no way that 100% APY will hold for 10 years.
Cake DeFi can’t keep up that rate for a decade because of their emission schedule. Right now, they are releasing DFI to investors like an IV drip to incentivize people to deposit their assets, but what happens to an IV bag over time? It runs out, and the same thing will happen with DFI due to its limited supply.
Many defi projects have the same problem. I’ve written about ViperSwap on Harmony and SushiSwap on Polygon — they both offer bonus rewards for liquidity providers that will run out over time.
And this is where I think PancakeSwap gains its advantage.
Let’s back up for a minute, though, and go back to what brought you here — how to turn a few bucks into a million. It’s an easy formula:
[High APR] + [Compounding] + [Time] = $$$
It’s really simple to turn $500 into $1M in 10 years. You just need a place that can sustain 100% APRs. Now, realistically, not even PancakeSwap can maintain those rates. It’s just not possible to have a thing be that lucrative for that long. People catch on, and as more people join, rewards get diluted, and the APRs go down.
Let me try to make the case for why PancakeSwap can still make you rich, though.
Three things I love about PancakeSwap
I rolled my eyes at PancakeSwap for its first few months. I didn’t like its stupid bunny and cutesy graphics, and I couldn’t figure out how to get funds onto Binance Smart Chain (BSC) to even use it if I wanted to. (Thanks, BinanceUS. Learn how to do it here.)
But it refused to go away, and I couldn’t help but notice the things they were doing. I grew to appreciate their pace of innovation more as the defi landscape across all blockchains began to feel like the clone wars, with Uniswap v2 clones like QuickSwap and KwikSwap competing against PancakeSwap clones like Cub Finance or Uniswap/Pancake clone-mashup, MochiSwap.
Syrup dens at Cub Finance?
That’s probably the thing I like most about PancakeSwap. They keep introducing new ways to engage the community. They have team battles, lotteries, and the new Prediction game. These are all ways to keep users coming back every day and using the service, which translates to more CAKE burned & more fees earned for liquidity providers.
The second thing I appreciate is that it’s on BSC. This is somewhat of a double-edged sword. Many folks don’t like BSC because it’s more centralized, but that’s what’s allows it to be faster and cheaper than Ethereum. Speed, low fees, and a large selection of tokens make PancakeSwap a great destination in the cryptocurrency ecosystem.
My favorite feature of PancakeSwap, though, is syrup pools. Syrup pools allow you to stake CAKE to earn other cryptos. Syrup pools run for a limited time and have a fixed supply of rewards, sort of like a mini-version of the aforementioned incentives provided by Cake DeFi, ViperSwap, and SushiSwap. As syrup pools expire, new pools rise like a sticky tide to take their place.
Those sweet, sweet syrup pools
Syrup pools are the feature that makes PancakeSwap so intriguing to me. The ever-changing selection of available cryptos creates a replenishing supply of rewards. PancakeSwap provides huge exposure to new tokens because of how much traffic and transaction volume it drives. Participating in syrup pools is akin to an advertising campaign for projects, i.e., new projects will be willing to pony up the rewards.
The CAKE syrup pool (stake CAKE to earn CAKE) rewards will slowly dry up, so making millions of dollars isn’t as simple as sticking funds in the auto-compounding pool and coming back in 10 years. However, as the rewards are reduced, you’ll be able to use the CAKE you’ve earned to earn other cryptos from higher-APR syrup pools, which can then be swapped back to CAKE and re-invested.
I believe this will enable PancakeSwap to outlast many of its competitors in terms of sustained rewards over time.
The elephant in the room: unlimited supply
Pancake’s native token, CAKE, has an unlimited supply. Critics love to point to this as the reason why CAKE’s potential is limited and say that it’s no better than fiat currency. Nobody seems to be critical of ETH, though, and many are happy to project that Ethereum will continue to grow and eventually take the market cap crown from Bitcoin.
Yes, PancakeSwap could ruin everything by making their CAKE printer go brrrr, brrrr, but it’s not really in their best interest to do so. What’s more beneficial to them is to reduce supply over time, to increase the scarcity of CAKE and make it more valuable. It’s worth noting that this is exactly what’s happening with Ethereum, as many analysts anticipate that the EIP 1559 upgrade scheduled for release in July will make ether a deflationary asset.
This combination of things is why PancakeSwap is poised to make many people a lot of money. Their pace of innovation is incredible, and their roadmap makes me confident that they’ll introduce new ways to earn, invest, and drive engagement from the community.
Syrup pools will continue to provide renewed incentives, even as CAKE emissions are reduced, allowing investors to earn high APRs for longer than with competing projects, and swapping & managing is no big deal thanks to the relatively low transaction fees of BSC. A bigger audience and high profile will make PancakeSwap’s syrup pools a premier destination for new projects, and tokens earned can be held for possible 10x/100x gains or swapped back to CAKE for reinvestment.
All the innovation and resulting traffic & activity will increase the burn rate of CAKE. That, coupled with the presumed reducing emission schedule, is sure to drive the value of CAKE up over time, making it a more effective syrup pool earner and standalone asset.
PancakeSwap and CAKE have a really bright future, and right now, it’s mindlessly easy to earn CAKE at a rate greater than 100% APY simply by dumping funds into the auto-compounding CAKE syrup pool. Stack CAKEs while they’re cheap and reap the benefits later by rotating them into new syrup pools and watching the value soar due to deflationary tokenomics!
Thanks for reading this story! I wanted to throw a few disclaimers here at the bottom. First, I’m not a financial adviser, just a crypto hobbyist. I hold CAKE, but I’m not affiliated with PancakeSwap in any way. I believe strongly in the potential of PancakeSwap & CAKE. Still, I only invest a tiny percentage of my overall portfolio there because, as I said, crypto is more of a hobby. As with all things in the crypto space, do your own research and be aware of risks.
Lead image by Mae Mu on Unsplash
This article was originally published on This Crypto Life on June 12, 2021.
