Ever since its launch in September 2020, PancakeSwap has been on an upward trend. Built on the BNB Smart Chain, the decentralised exchange (DEX) uses BSC’s native token, BNB.
However, do you really need BNB for every transaction on PancakeSwap?
In this article, you’ll learn about:
- Whether you need BNB to use PancakeSwap
- How much BNB do you need to pay in fees
- Use of WBNB on PancakeSwap
And more!
What is BNB?
Binance Coin, or BNB, is the native token of the BNB Smart Chain (BSC).
Initially created as a utility token for reducing trading fees in 2017, the cryptocurrency is now used for paying transaction fees on both the BNB Beacon Chain and Smart Chain.
PancakeSwap uses it for gas fees and liquidity provider fees. But do you absolutely need BNB to use this DEX? Let’s find out.
Do you need BNB to use PancakeSwap?
You will need BNB in your wallet to pay for gas fees if you’re performing transactions on the BNB Smart Chain. However, you can still use PancakeSwap on other networks like Ethereum and Aptos.
For every transaction on PancakeSwap, you need to pay some gas fees. This fee depends on the network congestion and how quickly you need the transaction to be done.
This is usually done in the respective native currencies of each network.
For example, if you want to swap between BNB and USDT on PancakeSwap,
you will need some BNB to process this transaction.
Since PancakeSwap can be used on other networks like Ethereum and Aptos, you will need to pay for your transactions in ETH or APT respectively.
As such, if you’re using ETH to get some CAKE or any other token on the platform, the gas fee and the liquidity provider fee that you would have to pay would be in ETH.
Here’s how the liquidity provider fee is shown in ETH in the image below. This is what converting 1 ETH into CAKE looks like on PancakeSwap.
Likewise, if you’re using APT to do the same, you would end up paying the gas fee and the liquidity provider fee in APT. This is what converting 1 APT into CAKE looks like:
That brings us to our next question.
How much BNB do you need to pay in fees?
PancakeSwap has different types of fees you need to pay in different circumstances.
If you’re swapping crypto on the platform, you would have to pay the gas fee and the liquidity provider fee.
The gas fee is a bit complex and hard to predict since it depends on the network congestion and the urgency of the transaction.
If there are a lot of transactions already waiting to be processed, the demand for validators is high. This causes the gas fee to rise significantly.
You can see the effect of high demand on Ethereum’s gas fee.
The urgency of your transaction is an important factor in determining the gas fee you would have to pay for your transaction. PancakeSwap has four modes for you to tell the platform how urgent your transaction is. Each mode has a different gwei value assigned to it. The more gwei is used, the higher the cost.
The first mode, the RPC Default mode, allows you to go ahead with the transaction with the gwei value set by the RPC in your digital wallet.
The next mode, the Standard mode, sets the gwei value to 5. This makes your transaction faster. If you know the network congestion is already a lot, going for this mode would ensure your transaction goes through quickly. But this speed comes at a higher cost.
If you need more speed for some semi-urgent task, you could go for the Fast mode which sets the gwei value to 6. While not a huge jump in the gwei value, the speed of transaction you can expect to see in this mode is pretty impressive. Since the gwei value is not too high, the cost doesn’t see a huge jump.
The Instant mode sets the gwei value to 7, at which, regardless of how bad the network congestion is, your transaction would sail smoothly. It is, as the name of the mode suggests, an instant transaction. This is especially useful in time-sensitive tasks where even a few seconds of delay could mean a loss to you. For that speed, you end up paying a lot more than what you would have paid if you had gone for the RPC Default mode.
Since the gas fee is rather low on the BNB network compared with the Ethereum network, it doesn’t set you back much. If you think it’s a lot, you can always change the mode and select one that fits your budget and urgency.
The gas fee is different from the trading fee that Pancakeswap charges.
While the gas fee can’t be talked about in definite terms, the liquidity provider fee is pretty straightforward. For every swap, you can expect to pay 0.25% of the amount as this fee.
This fee is broken down into three parts.
- 0.17% is paid to the LP token holders
- Out of the remaining 0.03%, 0.0225% goes to the Treasury
- 0.0575% goes toward CAKE buyback and burn
Can you use wBNB on PancakeSwap?
Yes, you can use wBNB on PancakeSwap.
Wrapped BNB, or wBNB, is a BEP-20 standard that allows tokens on the Binance Smart Chain to be used in and by other applications like wallets and decentralized exchanges.
Apart from that, this standard interface is also helpful in extending the ERC-20 standard. This helps in cross-chain transfers.
Differentiating wBNB from other tokens using the BEP-20 standard is the fact that wBNB tokens have no owner. Adding to its differences is the fact that it can be traded with alt tokens directly.
On PancakeSwap, wBNB is used while you’re swapping crypto since the platform needs to interact with the smart contract. In fact, without wBNB, you would not be able to swap alt tokens at all!
Conclusion
As useful as BNB is, you don’t absolutely need it to use PancakeSwap. You can use the platform to some extent if you only have ETH or APT (which can later be converted into CAKE to be used throughout most of the platform).
But if you have some with you, it can open doors for you to use all that the platform has to offer. In the end, it’s all about what you intend to do on the platform.
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