$$$ KPO and CZM $$$: PancakeSwap and PancakeBunny - Our Experience with DeFi

Sunday, April 18, 2021

PancakeSwap and PancakeBunny - Our Experience with DeFi

After trying out CakeDeFi, I had a better idea of what I was getting into and decided to take the plunge and try out the real deal. There are hundreds or even thousands of DeFi platforms/applications so why PancakeSwap?

It is one of the top DeFi platforms based on TLV (Total Locked Value) and the number 1 platform on the Binance Smart Chain (BSC) according to DefiLlama. Putting your money/crypto on these top platforms will reduce the risk of an exit scam/rug pull. As mentioned previously, the issue with those platforms that are on the Ethereum network is that the gas fees are too high now which makes it hard for new crypto users to participate. Every single transaction/action requires some gas fees because we will be using/performing some computation on the blockchain. For example, it might cost US$50 on Ethereum vs US$1 on BSC to perform a similar kind of transaction. 

Having said that, does being the number 1 platform means no risk? Of course not! We merely reduce the risk/possibility of an exit scam/rug pull. There will still be smart contract risk and impermanent loss. I have shown an example of impermanent loss in my previous article where I tried CakeDeFi. Smart contract risk is more abstract and probably harder to visualize/understand but guess what? It has actually happened on PancakeSwap before. Take a look at this articles for more information:

Now that we know some of the risks associated, let's get started. Firstly, you will need to configure/set up your personal wallet first. I am using MetaMask and you can follow the instructions here - Connecting MetaMask to Binance Smart Chain. I would like to emphasize that the seed phrase is extremely important and makes sure you do not lose it or share it with strangers or "tech support" because you will not be able to access your wallet without it or anyone with the seed phrase can get access to your wallet.

Next, we will need some BNB (Binance Coin) so I got them through Binance SG and paid through Xfers. Similarly, my initial capital was SG$5k. After that, I realized I cannot transfer from Binance SG to my wallet because the BNB is on another network (ERC20). Please share if you have a more efficient way of doing this!

So I had to transfer from Binance SG to Binance Global before transferring out to my Metamask wallet on the BEP20 (BSC) network. Binance has also put in place some tests to ensure that one knows what they are doing before the transfer because all these transfers are irreversible, once it is sent wrongly (wrong address or wrong network), everything will be lost. Note that there will be no customer support in the decentralized world.

As usual, I am also afraid of doing it wrongly so I transferred the minimum amount then (0.01 BNB with a fee of 0.0008 BNB) to test the water first. lol.

Once the test is successful, I went on to send the remaining ~SG$5k worth of BNB to my Metamask wallet. Once you reach this stage, I would say half the battle is won already. The remaining steps are just to connect your wallet to any of the DeFi app (PancakeSwap in this case) that you are interested in and click here and there. Nothing too complicated.

There are currently 2 ways to earn/get those crazy high yields. Syrup Pool which provides ~100% APR through staking of CAKE and Farms which provides ~9%-600% APR through staking of Liquidity Pool (LP) tokens. Generally, the higher the APR, the higher the risk. For those that prefer the safer approach is to farm the stablecoins (USDC-BUSD or USDT-BUSD) where there will be no/minimum impermanent loss. 

Another thing to note is the difference between the yields that are shown (APR vs APY). In short, APY includes the effect of compounding, hence it will be higher. This is where you got to decide your strategy and game plan. lol. I decided to just go with the most popular option which was the CAKE-BNB pair.

Similarly, to get the LP token, I will need an equal value for both coins, so I swap slightly less than half of my BNB for CAKE. Do take note and remember to keep some BNB to pay for gas fees!

Now that I have some CAKE, I can exchange both my CAKE and BNB for the CAKE-BNB LP token.

With the LP token, let's head over to the Farms section, "enable" that particular farm, and supply/stake the LP token to start "farming" more CAKE. I did not take a screenshot of the active farm then but you can take a look at my current farm. You will be able to see the amount of CAKE earned and an estimation of how much it is worth. 

After farming using CAKE-BNB for a few days, I decided to move most of them to PancakeBunny because it is providing a higher yield for the same LP token and has an auto-compounding feature. However, I also realized it has much higher gas fees when I tried harvesting it. For CakeDeFi, the liquidity rewards are automatically harvested every 12 hours and the DFI are automatically staked for more returns without the need to pay any fees. This is not the case in PancakeSwap. I will have to manually harvest the CAKE and stake them while paying gas fees for every single transaction which I didn't really like/wasn't very used to.

This is my current farming portfolio. I am tracking it using yieldwatch.net. It has grown from SG$5k to US$5.3k (~SG$7.1k) which can be mostly attributed to the increase in BNB and CAKE price. For those that are interested in the real-time view, you can track it by entering my wallet address - 0x91484822b5c0ec385380588425af5ad4afa7bf05.

The question is how are they able to provide such a high yield? Unlike BlockFi and Celsius Network which I have also blogged about previously, there is actually no actual business generating any revenue where part of it is shared with us. The high yields are coming from these governance tokens (CAKE and BUNNY) which are created out of thin air and given to us for providing liquidity to the DEX (Decentralized Exchange). Hence, they can easily lose their value very fast once they lose their popularity and people stop using these platforms. Eventually, the plan should be to convert/swap these governance tokens to stablecoins such as USDC or BUSD to realize the yield/profit.

Currently, I am getting an estimated US$30+ a day with a capital of SG$5k, that's about (30 * 1.33) / 5,000 * 365 ~ 291% annualized return! The plan is to just keep compounding and let the farm gets larger first before I start converting these governance tokens to stablecoins. Of course, there is also a high possibility that things might not go according to plan and I might just lose everything too. High risk high return? lol.

In my opinion, I do think the DeFi space is going to continue to grow. The current TLV is just US$121 billion which is actually very small compared to the existing finance space. To put it into context, it is similar to an AUM for just 1 bank in Singapore. Hence, I do believe that I am still not too late for the game as more and more people (especially youngsters) will probably start to join.

Anyway, I have blogged about different ways to leverage crypto to build wealth for people with different risk appetites:
The safer approach using stablecoins
Risky approach but more hassle-free
Highest risk and you are on your own
- DeFi apps such as PancakeSwap and PancakeBunny

The most important thing is to manage your risk - how much are you willing to lose without it affecting your daily life. Why bother wasting time trying to optimize your saving account which is just giving you 1%? lol.

On a side note, Futu's moomoo app attractive sign-up bonus (one free Apple Share besides other benefits) has been extended to 30th April 2021 (1500hr SGT)! Take a look at our review here.

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  1. hello! i have been a follower for a while now, really enjoyed your posts on how you are maximising your yields on crypto. im currently evaluating wallets and was wondering how did you decide on metamask

    1. Hi Jasmine,

      Thanks! To be honest, I didn't really spend too much time evaluating/deciding on a wallet. I went with metamask because it was the most popular choice and has integration with hardware wallet.