PancakeSwap is the most popular decentralized exchange built on the Binance Smart Chain. It is everything you’d want your exchange to be, but with a little something extra.
You can trade quickly and inexpensively across many pairs on the BNB Smart Chain, but you can also stake, participate in lotteries and special events, and much more.
This tutorial will focus on staking CAKE on users’ favorite BNB DEX, PancakeSwap.
| TL;DR |
|---|
| To stake CAKE on PancakeSwap, set up and fund your wallet. |
| Access the list of liquidity pools on PancakeSwap and select one. |
| Commit your tokens to the pool. |
| Once the lock period is over, collect your rewards, rinse, and repeat. |
How does Staking on PancakeSwap Work?
This article is not about staking cryptocurrencies per se, so we’ll go very deep on that. But you should know a few things, especially about Cake-LP tokens.
Staking takes place on proof of stake (POS) networks. You put your tokens to work by locking them in your wallet or smart contract.
By doing so, you actively participate in the consensus mechanism of the blockchain network. You are helping to validate transactions and maintain the network’s integrity. In return, you are rewarded with a portion of the network fees users paid.
The process is a bit different than staking on centralized exchanges. When you decide to stake your tokens on an exchange like Binance or Coinbase, the exchange does all the required steps on your behalf.
Which results in one major change. You do not receive any tokens back that would represent your stake in the pool.
On PancakeSwap and on other decentralized portals, you’ll receive LP tokens that represent your share in that particular pool. In this case, it’s a Cake-LP token.
These tokens also represent the right to earn a portion of the trading fees generated by the pool.
Why is this important? People get often confused about this. The LP tokens are essentially worthless on their own – they can be exchanged nearly 1:1 with the token they back, but if an investor misses this important feature of liquidity pools, they may think they lost their investment.
You can check our guide on “Selling” Cake-LP tokens, which talks more about how to remove liquidity from PancakeSwap.
How to Stake PancakeSwap’s CAKE Tokens
Because PancakeSwap is a decentralized exchange, you will need a compatible wallet that supports the Smart Chain network. We’d recommend going either with MetaMask or TrustWallet.
After you fund your wallet with tokens, you can connect it to the application and choose a liquidity pool. Then, select an amount of tokens you want to stake and confirm the transaction.
| Cake Staking APR | Generally around 6% |
| Lockup Period | 1 to 52 weeks or flexible |
| Minimum CAKE Needed | >0 |
1. Fund your Wallet with CAKE or (and) with BNB
Before you can stake CAKE on PancakeSwap, you must set up your wallet and fund it with tokens.
Other guides don’t stress this enough, but in all cases, you need BNB in your wallet, too. CAKE is a Smart Chain token whose native token is BNB. That’s used to pay for the network fees, which apply to all transactions, including delegating to a liquidity pool.
You have two routes to take:
- Fund your wallet with CAKE and BNB. All the CAKE can be staked, and the BNB tokens will be used to pay for network fees
- Fund your wallet only with BNB. You can exchange BNB for CAKE directly on PancakeSwap
Our recommendation? Check withdrawal fees on your centralized exchange like Binance and see which option is cheaper.
2. Connect the Wallet to PancakeSwap
Once you have enough tokens in your wallet, head to PancakeSwap.finance and connect it.
You can see a “connect wallet” button in the top right corner.
3. Head to the Earn Page and Find a Liquidity Pool you Want
Once you connect your wallet, hover your mouse over to “Earn” in the top bar and choose “Pools.”
You can see a few other options there; let’s run them over quickly:
- Farms stands for liquidity farming. In that case, you are not delegating your tokens to validate transactions but liquidity pair for others to trade with. You have to have both tokens in that pair.
- Liquidity Staking works similarly to farms.
- Simple Staking is a new feature on PancakeSwap from the end of September 2023. It’s a feature brought by Binance. With simple staking, you stake one token and earn your rewards in that token. Whereas in Pools, you can indeed stake CAKE/earn CAKE, but you can also stake CAKE to earn other tokens.
But Syrup Pools are the best option. It offers the best rates, and it’s also very flexible in terms. You can select your own lockup period of up to 52 weeks, and it is used by most users, limiting the risks.
3.1 How to Select the Right Staking Pool for You
When deciding which pool to choose, you should consider these things in particular:
- What APRs can I get?
- What are the terms? Am I required to lock my tokens, and am I okay with that?
- Is the pool indefinite, or will it end soon?
- In which token are the rewards paid? If it’s paid in another token, am I able to comfortably sell those?
As with all other investments, the higher the anticipated rewards, the higher the risk.
If you are required to lock your tokens, the risk goes up tremendously: in case something happens in the market (the price crashes or rockets up), you can’t do anything, you can’t sell. Consider if you are ready to take that risk.
On PancakeSwap, only the base CAKE pool is indefinite. Other pools end, and they are usually launched for three months. You should consider whether there is enough time for you to accumulate rewards to at least break even.
You will pay gas fees multiple times – sending your tokens to MetaMask or other wallet costs fees, and allocating your tokens to the pool also does. Not to mention that you have to exchange the tokens once you are done.
If only a few days remain and your capital is low, you will probably lose money in the end.
4. Make the Transaction
Once you selected the appropriate staking pool, click on “Enable Pool” in the details. With that, you are permitting PancakeSwap to spend your tokens. It’s a smart contract, so it doesn’t work like a standard transaction.
If you are using MetaMask, it will give you the option to set a spending cap.
With that, you are protecting yourself in case PancakeSwap gets hacked. We’d recommend setting it a bit higher than your intended allocation.
Then select either flexible or locked staking and set the lock period.
Finally, fill in the amount of CAKE you want to stake and confirm the transaction in your wallet.
5. Track your Staking Portfolio
It will take time before you actually start earning or break even. As was already said, you pay many fees from the moment you buy your tokens up to delegating them to the staking pool.
That’s why it’s a good idea to track your staking portfolio.
A simple spreadsheet will do. In it note all the fees you paid and calculate how long you need to wait before you start earning.
Also, closely monitor what is happening on the network. The yield rates can go up and down from hour to hour, or there may be some promotion you don’t want to miss out on.
When you establish a system, it is not that time-consuming. We at Help With Penny usually check our portfolio every Monday in a spreadsheet. It’s color-coded, so we know it when something needs our attention.
How to Unstake CAKE
To unstake your CAKE tokens, return to the pool you delegated your tokens to and click on “Remove Liquidity.”
Enter the number of tokens you want to unstake and confirm the transaction in your wallet.
If you want to learn more about the process behind the curtain, you can check our guide on How to Sell PancakeSwap’s Cake-LP Tokens.
How much can you make Staking CAKE?
As it’s said, only the sky is the limit. There’s no cap on how much you can earn staking CAKE.
It depends on the APRs of the particular pool but, most importantly, on your capital.
Pools can either be automatic or manual. Automatic pools will automatically take your rewards and include them in your total staking balance. In the manual, you have to reinvest your earnings manually.
That’s called compounding, and oh man, it is powerful. As you earn more, you earn even more because you have a bigger balance that gets interest. More gets you even more, which gets you even more rewards.
As you can tell, time is the most significant factor. The longer you can leave it there, the better.
How much CAKE do you Need to Start Staking?
On PancakeSwap, there’s no minimum amount set. You can start with as low as 1 CAKE (probably even lower than that).
But that’s not really recommended. You will pay even more on fees than you will stake, and to earn that back, you would need years.
From our experience and from our conversation with Reddit users, we’d recommend starting with at least $100.