PancakeSwap (CAKE), the leading multichain decentralized exchange (DEX) running on the Binance Smart Chain (BSC), has suffered a significant 12% drop in its total value locked (TVL) to $2.4 billion.

The crypto crackdown by regulators targeting Binance’s stablecoin BUSD triggered a decrease in the stablecoin supply. This has negatively impacted the growth of the BNB Smart Chain, affecting protocols and DEX’s TVL. 

What has set PancakeSwap apart from UniSwap and SushiSwap exchange since its inception is that it runs on the BSC instead of the Ethereum smart chain.  However, PancakeSwap has gone multichain, launching on both Ethereum and Aptos.

Unlike traditional exchange models, the AMM allows traders to use permissionless liquidity pools to exchange digital assets, which are given a liquidity provider (LP) token for which they decide to add funds to the liquidity pool. 

According to DeFiIgnas, decentralized finance (DeFi) researcher, PancakeSwap overtook UniSwap by total value locked on November 29. 

In a bold move to address liquidity issues affecting the decentralized exchange, PancakeSwap launched its market maker integration on Ethereum and Atpos in February. The market maker integration will serve as an additional source of liquidity to the existing AMM to help traders operate and “enjoy better liquidity,” according to the exchange. 

By integrating PancakeSwap’s MM with its AMM, the exchange will improve swaps of ERC-20 tokens on the Ethereum smart chain. In addition, PancakeSwap’s integration with market makers on Ethereum will also result in the introduction of Ethereum, Bitcoin, and Stablecoin trading pairs on the exchange.

The anonymous developer behind the exchange Chef, the co-founder of the exchange, noted:

We thought about how we could best serve our community and new Ethereum users without excessively emitting precious CAKE to acquire extremely high levels of TVL

With the integration on Ethereum, PancakeSwap will allow customers to be directed to approved market makers and the AMM, according to DeFiIgnas, which explained that this would result in lower fees and better spot prices. He claimed:

It is a creative solution to the liquidity problem. Liquidity Providers (LPs) don’t deposit assets into an AMM if there’s no trading volume to generate yield. And user’s don’t trade where slippage is high. So, market maker integration solves this Chicken & Egg dilemma.

PCS continues to bring innovation to the protocol with the launch of V3 on April 1. The upgrade will add features such as improved liquidity provision, competitive trading fees, trading incentives, and yield farming tools that allow users to maximize their returns and rewards. 

These products can attract more users and capital to the exchange, increasing the protocol’s revenue and enhancing PCS’s value to investors. DeFiIgnas concluded:

DEX space is the most fun to watch due to cut-throat competition. My prediction for 2023 is that it will lead to a diversification of their business model. The Market Maker integration, uniqueCAKE veTokenomics, and various incentives make PCS different.

After burning 7 million tokens with a total value of $27 million on Monday, the DEX’s native token has been downtrend from its annual high of $4.68 in February. Currently, the token is trading at $3.56 following the ongoing problems on the exchange despite the recent announcements from PancakeSwap.

Featured image from Unsplash, chart from TradingView.com 

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