In the crypto community explosion era, many platforms were introduced to support decentralized exchange, among which are Uniswap and PancakeSwap. With its early launch and having a large total volume of TVL, there was a time Uniswap was the prominent name in the AMM market. However, by solving the problem of the high gas fee and slow speed of the Ethereum platform, PanscakeSwap has quickly developed and created a strong foothold in the market.

This writing will walk you through two well-known platforms and their potential in the future.

About Uniswap

Uniswap was founded by Hayden Adams and first launched on November 2, 2018. It is the largest and most popular decentralized exchange running on the Ethereum blockchains. Uniswap is also one of the first successful Dex. Since its launching in 2018, Uniswap has expanded significantly to the point that the dex now generates over 3 billion dollars a day in volume. At present ( May 2022), the total  TVL of  Uniswap is about 8.18 billion $. In addition, Uniswap has a strong community, and transactions on the platform are always towards decentralization, which helps them to affirm the prestige and advantages in the long term over other decentralized trading platforms.

Uniswap work by the AMM mechanism (Automated Market Marker) and the valuation of each transaction is determined by a mathematical formula. The price of Uniswap was calculated according to the formula k = X x Y, where k is a constant, and X and Y are the total supply of 2 trading tokens. The transaction fee will be distributed to all the liquidity distributors in Uniswap.

Over three versions, the latest version has many improvements and upgraded features compared to the previous: providing efficient capital raising sources, better price adjustment control for liquidity providers, improving accuracy and convenience of price sourcing, and more flexible pricing structures.

About Pancake Swap

Pancake Swap is a decentralized exchange (DEX) launched on September 20, 2020. It is run on the Binance platform and developed anonymously. Pancakeswap provides some exchange features similar to Uniswap while also providing many other core features on the Binance Chain Platform. In addition, the transaction fee on this platform is significantly lower compared to the others. Like Uniswap, Pancake swap was built with an AMM mechanism that allows users to provide liquidity and receive pairs of LP tokens known by the name Flip.

These LP tokens can be used to reclaim a pair of tokens from liquidity providers that have deposited many corresponding tokens with some profit from the transaction fee of the exchange. In addition, Pancake also provides more liquidity through yield farming of token governance called CAKE. Although it runs on Binance, Binance doesn't have control over  PancakeSwap or its operation.

In addition, PancakeSwap has other features that allow users to send a token to another platform through Binance Bridge and wrap the token as a BEP-20 token to be used in the DEX of Pancake Swap. There are several common tokens wrapped in PancakeSwap, including BNB, BELT, CAKE, ETH, etc.

Fundamental Difference between PancakeSwap and Uniswap

TVL ( total value locked) of Uniswap is higher than PancakeSwap. Uniswap has $8.18 billion in its exchange, while Pancake Swap has about $5.19 in TVL.

Since Uniswap is operated on the Ethereum platform, where gas fees are significantly rising every day, its transaction fee is costly. At the same time, Pancake Swap is built on BSC ( Binance Smart Chain ) to be faster and has lower transaction costs.

Fee: When exchanging in Uniswap v1 and v2, you have to pay fees of 0.3% for each transaction. All of these fees will be distributed to liquidity providers. In version 3, the swap fee is no longer locked at 0.3%. Instead, they vary depending on each pool. The fee price of each pool is set in initialization. The initially supported fees are 0.05%, 0.30%, and 1%. In addition, UNI governance is able to add additional values to this set.
In PancakeSwap, the fee for each transaction is 0.2%. Only 0.17% of this fee will be sent to the liquidity provider, and the rest will be taken by Pancake Treasury which is managed by developers.

Uniswap absolutely defeats PancakeSwap on the side of the number of tokens listed on the exchange when it has above 1600 crypto tokens, while Pancake Swap only has nearly 200 crypto tokens.

RoadMap

Uniswap: In March 2021, Uniswap released Uniswap v3, providing more features that over the weakness of the previous protocol, there are several significant new features:

  • Concentrate Liquidity: with the new version, Liquidity providers can concentrate their liquidity by setting limits within an arbitrary price range. The new feature improves the pool’s capital efficiency and allows Liquidity Providers to calculate approximately their reserve curves while still the rest of the pool.
  • Protocol Fee Governance: UNI governance has more flexibility  in setting the fraction of swap fees collected by the protocol
  • Improved Price Oracle: v3 allows the user to query current price accumulator values. Therefore users don't have to checkpoint the accumulator value at the beginning and end of the period for which a TWAP is being measured.

Pancake swap RoadMap

  • PancakeSwap implemented most of the features in their roadmap; although there are some decentralized lending  & borrowing, and leveraged trading, a fixed-term Staking hasn’t been released.
Source: PancakeSwap website

Some upcoming features of the Product:

  • Emission Reduction and Buy-back & Burn Mechanism: this will decrease Cake's supply to increase the Cake Holder's confidence about the token price.
  • Lending & Borrowing: Increase the Liquidity of the market; therefore, the Liquidity Holder will receive more profit by providing liquidity
  • Referral Program và Gamification: attractive more users take part in the protocol

References:

[1] Uniswap Whitepaper, Uniswap document, accessed 12th March 2022.

[2] Difference Between PancakeSwap and Uniswap (With Table), askanydifference.com, accessed 12th March 2022.

[3] PancakeSwap roadmap, PansakeSwap document, accessed 12th March 2022.