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PancakeSwap is a decentralized trading platform built on the BNB Smart Chain (BSC), is where users can trade, earn, and win crypto. Staking is possible on PancakeSwap because BSC is based on a Proof-of-Stake (POS) consensus algorithm. It relies on a Proof of Stake Authority (PoSA) through which users can stake coins to become validators.
BSC, which was recently rebranded as BNB Chain, is a different type of blockchain vs. Bitcoin, which relies on the energy-intensive Proof of Work (PoW) consensus algorithm. It relies on the computing power of miners to validate transactions on the blockchain. Those miners are then rewarded with newly minted bitcoins. By way of comparison, Ethereum recently migrated from a PoW to a PoS consensus algorithm.
PancakeSwap is behind what are known as staking pools through which users generate passive returns in exchange for placing their coins on the platform to bolster liquidity. The annual percentage rates (APRs) for staking the CAKE token, the native cryptocurrency of the PancakeSwap platform, are quite high, ranging between approximately 40% and over 53%, as illustrated in the below table.
Given all the hype around PancakeSwap and staking, we thought now would be an excellent time to dig a bit deeper into the platform. We have compiled the most important information you’ll need to know about PancakeSwap staking and how to participate in the craze.
- Chief among the pros of staking is that investors can bolster their profits beyond returns in the cryptocurrency market alone. PancakeSwap is able to offer APRs in the double and even triple digit percentage range due to the popularity of the platform among traders and stakers alike.
- Another benefits of staking on PancakeSwap is that it’s a tried and true platform in the world of DeFi. You will be joining 2 million users on the PancakeSwap platform across 55 million trades in a 30-day period, and $3.7 billion staked in what is known as the total value locked (TVL).
- Many users flock to the PancakeSwap platform to generate passive income. This is one of the key features of staking, which is to let your money — or in this case crypto — work for you.
- PancakeSwap has been audited by CertiK, which can give investors some assurance that the platform is transparent and not hiding anything.
- The primary risk associated with staking CAKE tokens on PancakeSwap has to do with smart contracts on the blockchain. If there are any vulnerabilities in these automated contracts on the blockchain, bad actors might be able to exploit them and steal fund
- DeFi is a lightly regulated market globally, leaving investors with little recourse if something goes wrong.
- There are a couple of layers of fees involved with staking, including “unstaking” or withdrawal fees within the first 72 hours.
- If the price of the CAKE token (or any token you stake) falls between when you place the coins on the platform and when you withdraw, you lose money when you unstake the coins.
- 1 What is PancakeSwap Staking?
- 2 How to Stake PancakeSwap?
- 3 PancakeSwap Staking Tax
- 4 Why do people like Staking PancakeSwap?
- 5 Conclusion
- 6 PancakeSwap Staking FAQs
What is PancakeSwap Staking?
Staking is the practice of committing some of your crypto tokens onto a trading platform for a period of time to provide liquidity to traders. If you were planning to hold the tokens anyway, it gives you an opportunity to earn while holding.
In the case of PancakeSwap,you can stake single tokens, like CAKE, in a syrup pool. Staking tokens could also be presented in pairs such as CAKE/BNB. Investors can choose to stake their CAKE tokens alongside another token, say BNB, in order to earn even more CAKE tokens.
By staking their tokens on the PancakeSwap platform, stakers provide traders with the liquidity they need to swap tokens. Stakers are rewarded for doing so with yields. The yields are generated from the fees paid by traders on the PancakeSwap platform for swapping one token for another.
For instance, if a trader wants to swap their Binance Coin (BUSD) tokens for Tether (USDT), both of which are stablecoins, they can do so on PancakeSwap for a fee. That fee is then returned to the investors who are staking their coins in the form of passive income. Staked coins are stored in what’s known as a liquidity pool, which provides liquidity to traders. The more volatile the crypto asset, the higher the yield is likely to be simply because there is more risk involved. Staking yields are fluid and change constantly.
PancakeSwap offers different types of staking, including flexible and fixed. Flexible staking lets users stake their CAKE tokens and generate rewards with the option to unstake, or withdraw their CAKE tokens from the platform, at any time. Fixed staking ups the ante so that staker rewards are amplified in exchange for agreeing to lock up your CAKE tokens on the platform for a fixed period of time determined by the staker, aka liquidity provider.
How to Stake PancakeSwap?
You will find that it is rather simple to stake on PancakeSwap. The trickiest part just might be obtaining the right wallet, whether it’s MetaMask or BNB, for example.
- First, you must choose a coin that you’d like to stake. In this case, we are looking to stake CAKE tokens, the native cryptocurrency of the PancakeSwap ecosystem.
- Be sure and download the relevant wallet. In this case, PancakeSwap requires stakers to have a MetaMask wallet or a BNB wallet. One option is to use the Binance Chain Wallet extension for Google Chrome. In addition, you can import an address from hardware wallet Ledger to the Chrome extension and access the BSC app on the Ledger device.
- Be sure the wallet contains CAKE tokens and BNB tokens, the latter of which will be used to pay for gas (blockchain transaction) fees. PancakeSwap advises users to use the Google Chrome browser, but the MetaMask BSC connection is another option.
- Choose a Syrup pool in which you want to stake. You’ve got three to choose from: IFO CAKE (automatically compounds your rewards while your earnings are harvested and reinvested in the same pool; you may earn an IFO credit); Auto CAKE (automatically compounds your rewards and earnings are harvested and reinvested in the same pool for you); and Manual (there’s no auto compounding involved; instead, you must harvest and compound your earnings on a manual basis).
- Now that you’ve got your wallet squared away, you’re ready to visit pancakeswap.finance/. From here, click on the “connect” button in the upper right hand corner.
- Next, click on the “Binance Chain” wallet. You should see your wallet pop up. Once you do, click “connect.”
- Find the “Pools” option on the left-hand menu and click on it. This is where you’ll find all the available staking pools from which you can choose. For our purposes, we are looking for the CAKE pool.
- Once you find it, click on the “Approve CAKE” button
- You will see your wallet appear, at which point you should be prompted to click “confirm”
- Now you must wait for the transaction to be confirmed on the blockchain, which shouldn’t be too long considering blocks are completed in a few seconds.
- Now you’re ready to join the staking pool. Find the CAKE pool and click the + button. Enter the amount you’d like to stake and click “confirm.” PancakeSwap should inform you of how much your approximate ROI will be at the current rate.
- If you are using a MetaMask wallet, you will find yourself confirming each step of the staking process along the way to ensure that you are the one enabling PancakeSwap to hold your tokens for staking. This is a security measure.
- Next, your wallet should appear once again displaying the transaction details.
- The transaction now must be completed on the blockchain. Once complete, you are officially staking CAKE in PancakeSwap’s CAKE pool.
- Your wallet should display a stake update along with your CAKE balance. In addition, by refreshing the PancakeSwap staking page, your earnings should begin to appear on the dashboard.
- You can redeem your funds at any time (unless you’ve opted for fixed staking) by making a withdrawal from the pool. The amount you earn is commensurate with how much crypto you stake.
PancakeSwap Staking Tax
Now that you will be earning returns through staking your CAKE tokens, you’ll have to also think about paying taxes on those earnings. Any income earned through staking in the U.K. should be treated as miscellaneous income, which is subject to income tax.
The value of the staking rewards on the day you receive them should be equivalent to the amount of taxable income. If you happen to be a financial trader in the crypto markets, your staking earnings may be taxed as trading income instead of miscellaneous income.
PancakeSwap does not distribute tax forms to investors. They simply aren’t able to keep up with the prices for each and every transaction to determine capital gains. So this is up to each individual to do themselves or hire a tax professional to help. Some of the concepts to be aware of include:
- Cost basis
- Gross proceeds
- Date the funds are received or invested
While collecting this information could be time-consuming, it could save you a lot of work when tax time rolls around. You will find crypto companies out there like CoinLedger that have made this process easier with crypto tax software, which will help you to generate tax reports in a few short minutes. You’ll just have to be willing to connect your crypto wallet
Why do people like Staking PancakeSwap?
Staking is a way to earn passive income. People like staking on PancakeSwap, in particular, because it lets investors know in advance how much they can expect to earn by staking their coins. PancakeSwap displays a list of the hot staking pools and the types of APR they are generating.
So let’s say that the annualized rate for staking CAKE tokens is 51.32%, and you stake $1,000 worth of CAKE tokens. At this rate, your rewards are $513.20 in addition to your initial investment of $1,000.
In addition to the double-digit APRs attached to trading pairs, people also like staking on PancakeSwap because there is no shortage of staking pools to choose from.
Staking is part of the decentralized finance (DeFi) phenomenon that has taken the financial services industry by storm. If you are planning on holding onto your crypto tokens anyway, staking is a way to generate passive returns on them. This means your coins will continue earning money for you even while you are asleep.
PancakeSwap makes it simple to begin staking on the platform with single pools known as Syrup pools. Once you get used to it, you could begin staking multiple coins and potentially amplify your returns. Staking is a wildly popular activity in the DeFi market and PancakeSwap is one of the most popular exchanges on which to generate passive income. Don’t forget to pay the piper (taxes) on your earnings.
PancakeSwap operates on Binance Smart Chain, which as of November 2021 had recorded over 1.7 billion transactions since it was launched in 2020.
PancakeSwap Staking FAQs
How much can I earn by staking PancakeSwap?
The rates at which you can earn rewards change frequently. If you invest $1,000 into staking CAKE, at an annualized rate of 51.29%, you can expect to earn approximately $42.00 per month or $512 per year.
Are there risks associated with staking PancakeSwap?
There are risks associated with DeFi and PancakeSwap is no exception. The primary risk is associated with the smart contracts, which is where funds are stored on the blockchain. Should there be any weaknesses in these contracts, scammers might be able to access these contracts.
When can I withdraw my earnings?
You can decide to withdraw your funds at any time. The PancakeSwap dashboard presents you with a digital card. All you have to do is click on the “minus” button on the card to begin withdrawing your CAKE tokens. This in turn will create an unstaking menu, which will let you withdraw a specified number of CAKE tokens, determined by you.
What if I’ve chosen fixed-term staking?
If you have opted into a fixed-term staking agreement, you can’t make withdrawals until that period is over. When the fixed term is over, you’ve got seven days to either convert your CAKE tokens to flexible staking or begin another fixed-term staking term.
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