Decentralized finance (DeFi) protocol PancakeSwap has launched version 3 of its automated market maker platform on BNB Chain and Ethereum, with the upgrade encompassing performance improvements and lower fees.
PancakeSwap is a popular DeFi platform that enables users to trade cryptocurrencies without intermediaries. It operates as an automated market maker (AMM), meaning that it relies on a smart contract to determine the price of tokens based on the ratio of supply and demand.
One of the key features of PancakeSwap V3 is enhanced capital efficiency. In the previous version of the platform, liquidity from providers (LPs) was distributed uniformly along the price curve of trading pairs. This approach was considered inefficient because assets typically trade within certain price ranges. V3 allows liquidity providers to select a custom price range to provide liquidity, allowing specific control over capital investments to higher volume trading ranges.
Moreover, PancakeSwap V3 features four new trading fee tiers ranging from 0.01% to 1%, which is a change from V2’s standard 0.25%. Every token pair can have liquidity pools for each tier. PancakeSwap expects asset pairs to be drawn to tiers where incentives for LPs and traders align. This approach is an effort to balance between traders targeting the lowest fees while still incentivizing LPs. The higher percentage trading fee tiers cater to assets that have higher impermanent loss or lower liquidity. This mechanism intends to provide more fee revenue and incentive for LPs.
PancakeSwap caters to a broad DeFi user base, accounting for over $2.5 billion of total value locked and serving over 1.5 million unique users. The platform also revealed upcoming features that are still in development, including a trading rewards program incentivizing traders with exclusive benefits, while a position manager feature aims to improve user experience when depositing tokens as liquidity.
In other news, Arbitrum (ARB) has been in the spotlight in March, with its highly-anticipated airdrop consolidating around $3.3 million from over 1,400 addresses into two controlling wallets. Arbitrum is a layer-2 scaling solution for Ethereum that aims to improve its scalability and lower its transaction fees. Its airdrop has generated significant interest from DeFi enthusiasts who are looking for new opportunities to earn rewards.
In summary, PancakeSwap V3 is a significant upgrade that aims to improve capital efficiency and lower trading fees. It also features four new trading fee tiers that cater to different types of assets and traders. With over 1.5 million unique users and more upcoming features in development, PancakeSwap is likely to remain a popular DeFi platform.