Uniswap’s DeFi supremacy is being challenged by PancakeSwap (CAKE).

pankake-swap

PancakeSwap has risen to prominence as one of the most successful DeFi sites, and its Binance Smart Chain integration makes it a liquidity magnet when compared to competitors such as Uniswap and SushiSwap.

Over the last month, nonfungible tokens have taken precedence over decentralized finance, but that hasn’t stopped the top DeFi projects from creating and strategizing how to expand their ecosystems and market share.

PancakeSwap (CAKE), a Binance Smart Chain-based automated market maker (AMM) that allows users to exchange tokens and earn a portion of fees through yield farming, has recently outperformed the industry.

Monthly trading volume on PancakeSwap. Source: Delphi Digital

Several factors have played a significant role in helping the PancakeSwap ecosystem evolve in recent months, according to a recent study from Delphi Digital, and analysts expect that the protocol will continue to be a serious competitor to Uniswap.

Strong Ethereum fees are driving users away.

Anyone attempting to transact on the Ethereum (ETH) network in 2021 may have noted the massive increase in gas fees, which has been exacerbated by the rising price of Ether.

Average Ethereum gas fee. Source: Etherscan

When you compare this chart of Etherum’s average gas fees to the chart above of PancakeSwap’s monthly trading volume, you can see a connection between higher fees and more activity on the DeFi platform.

Due to numerous cross-chain bridges and low transaction costs, Binance Smart Chain (BSC) emerged as a viable alternative when Ethereum fees were skyrocketing. PancakeSwap is the BSC’s largest and most developed DEX, so it benefits from the influx of new users as well as Binance’s broad user base.

Binance’s huge ecosystem, according to Delphi Digital analysts, is another big factor improving CAKE, as it has a “vast network impact” as the “largest crypto exchange that’s usually the first option for retail traders.”

Users can gain access to the BSC by removing their tokens from Binance and depositing them in a BSC-supported wallet.

PancakeSwap has the potential to be a ‘perpetual vampire.’

CAKE’s token economics were also cited by Delphi Digital as a key factor in the company’s future growth.

There is no hard limit on the supply of CAKE tokens, unlike UNI and SushiSwap (SUSHI), giving the platform the “ability to perpetually execute targeted vampire attacks in order to attract liquidity and incentivize ventures to launch on PancakeSwap’s AMM.”

CAKE currently has a weekly inflation rate of 3.78 percent, which is slightly higher than UNI’s annual inflation rate of 2%.

Despite CAKE developers’ numerous deflationary steps, “net emission is approximately 1,000,000 CAKE per week – which corresponds to 37 percent actual inflation annually (or 0.7 percent weekly).”

PancakeSwap is aware of the current inflation figures, according to Delphi Digital, and the team has announced a governance vote to adjust the emission schedule, with options to keep it the same, reduce it to 23.5 or 22 CAKE per block.

The choice to reduce emissions to 22 CAKE, a 20% reduction, is currently favored to win, which will result in a reduction of 1,050,000 CAKE emissions. This will help to hold inflation at bay while still maintaining the project’s vampire attack capabilities in the long run.

CAKE tries to break through the opposition.

CAKE has made several attempts to break out to a new all-time high after hitting a low of $8.30 on Feb. 28, according to data from Cointelegraph Markets and TradingView. At the time of writing, the altcoin trades for $15.63.

CAKE/USDT 4-hour chart. Source: TradingView

Market conditions for CAKE have been favorable for some time, according to data from Cointelegraph Markets Pro.

The VORTECSTM score is an algorithmic comparison of historic and current market conditions derived from a variety of data points like market sentiment, trading volume, recent price fluctuations, and Twitter activity, which is unique to Cointelegraph. Using particular strategies outlined in the paper, a recent test of the framework yielded investment returns of up to 1,497 percent.

VORTECS™ Score (green) vs. CAKE price. Source: Cointelegraph Markets Pro

The VORTECSTM Score for CAKE turned green and recorded a 65 on March 21, approximately six hours before the price started to rally over the next four days, as seen in the chart above.

The VORTECSTM Score continued to rise after the initial precise rise on March 22, reaching a high of 81 on March 25, three hours before the price started to rally 36 percent.

PancakeSwap is in an enviable position to attract additional liquidity from Ethereum-based DeFi protocols as a practical solution to high gas fees remains elusive. Strong support from Binance and low fees on BSC have placed PancakeSwap in an enviable position to attract additional liquidity from Ethereum-based DeFi protocols as a practical solution to high gas fees remains elusive. Despite worries about inflation, analysts recommend keeping an eye on this Uniswap competitor as the fight for DeFi supremacy continues.

The author’s views and opinions are entirely his or her own and do not necessarily reflect those of Cointelegraph.com. Every investment and trading decision entails risk, so do your homework before making a decision.