Over the past month, the decentralized economy has receded into the background among the innate tokens, but that hasn’t stopped DeFi’s best projects from developing and creating strategies for developing ecosystems and market shares.
One of the projects that crossed this region as late as possible is PancakeSwap (CAKE), an automated market maker (AMM) based on Binance Smart Chain that allows users to exchange tokens and get a portion of their commission through refunds.
Monthly turnover on PancakeSwap. Source: Delphi Digital
Several factors have played a role in the growth of the PancakeSwap ecosystem in recent months, according to a recent report by Delphi Digital, and analysts expect the protocol to remain a serious competitor to Uniswap.
Users flee due to Ethereum fees hike
Anyone trying to transact on the Ethereum (ETH) network in 2021 will notice an astronomical spike in gas taxes, which has been exacerbated by the rise in the price of Ether.
Average Ethereum gas tax. Source: Etherscan
If you compare this average gas price graph on Etherum to the graph above showing the monthly volume on PancakeSwap, you can see the relationship between higher fees and more activity on the DeFi platform.
While Ethereum fees have skyrocketed, Binance Smart Chain (BSC) has emerged as a viable alternative thanks to several cross bridges and lower transaction costs. PancakeSwap is the largest and most popular DEX on BSC and benefits from an influx of Binance users and a large user base.
Delphi Digital analysts have identified Binance’s mega ecosystem as another major factor giving CAKE a boost, as the “enormous network strength” stems from the fact that “the largest cryptocurrency exchange is usually the first choice for retailers.”
Potential users could access BSC by simply pulling tokens from Binance into a BSC-backed wallet.
PancakeSwap could be an eternal vampire
Delphi Digital has also highlighted that the CAKE token economy is an important driver of future growth.
Unlike UNI and SushiSwap (SUSHI), there is no cap on the supply of CAKE tokens, giving the platform “the ability to continuously launch vampire attacks to attract funds and spur project launches on AMM PancakeSwap.”
CAKE’s current weekly inflation is 3.78%, well above the UNI’s 2% annual inflation rate.
Even taking into account the various deflationary measures implemented by CAKE’s developers, “net emissions are around 1,000,000 CAD per week, which is equivalent to 37% of real inflation per year (or 0.7% per week)”.
According to Delphi Digital, PancakeSwap knows what the current inflation rate looks like and the team has voted to change the emissions plan with the option to keep it as it is, up to 23.5 or 22 buns per block.
Currently, the preferred option is to reduce emissions to 22 cakes, that is, a 20% reduction, this would reduce cake emissions by 1,050,000. This will help neutralize inflation while at the same time allowing the project to preserve the potential for a vampire attack in the long run.
CAKE tries to break the resistance
Data from Cointelegraph Markets and TradingView shows that CAKE’s price has made several attempts to break its all-time high since hitting as low as $ 8.30 on Feb 28, and the alt currency is trading at $ 15.63 at the time of writing.
According to Cointelegraph Markets Pro, market conditions have been favorable for CAKE for some time.
The VORTECS score, excluding the Cointelegraph, is a mathematical comparison of historical and current market conditions derived from a set of data points, including market sentiment, trading volume, recent price movements, and Twitter activity. A recent test of the system yielded a ROI of 1,497% using the specific strategies outlined in the report.