The era of centralized finance is now being removed by the decentralized finance process and there are a certain number of people to make the tradition be removed and exchanged for the sake of decentralized finance. As there is no need to provide proof of identity, although this seems shady and dubious, most people are now feeling safer and secure with decentralized finance and its modeling. The amount of ease it provides makes the traders and users feel autonomy and control over what they are transferring and receiving.
As Binance and other centralized exchanges appeared and started functioning, some popular ones gained their names and fame among the masses. Among them are working on creating liquidity pools, such as Uniswap and PancakeSwap. These two and many others are famous for providing liquidity pools and therefore those who stake their tokens here are provided handsome returns and yields. The decentralized exchanges (DEXs) have the highest trading and exchange volume; therefore, we would compare both. Let us look at how the issues of DeFi (decentralized finance) and protocols work, and which one provides better features and fewer fees.
Uniswap-An ERC20 DEX
Uniswap is an ERC 20 or Ethereum network-based exchange and hence can trade ERC20-supportive coins and tokens. Although there are numerous changes made in this regard, the upgrades and quick transactions make it a top-of-the-list choice. Uniswap functions exclusively differently than centralized exchanges (CEX) and there is no concept of order books such as in Centralized Exchanges (CEXs). Uniswap provides liquidity pools of different assets, and some multiple tokens and coins are developed on the ERC-20 network. The available assets in the liquidity pools are traded for a fee. While the liquidity pools are developed upon the automated market maker (AMM) based technology that helps market makers to earn rewards by adding their assets to the pool, Uniswap gains more advantage, and the trading volume is heightened.
These were some of the perks associated with Uniswap and using this DEX to swap your currencies, however, there are some disadvantages associated with the network. Uniswap in the past faced the challenge of high fees or gas fees. When the transaction costs were higher, the Uniswap protocol was reliant on the Ethereum blockchain to cope with order books and settlements. As there are more requests generated on the Ethereum blockchain it became expensive, and traders had to wait for more to settle down their transactions. A faster transaction was taking significantly higher charges and less time, while the rest had to wait for their trades and transactions to be completed. Previously, there were 15 transactions per second (TPS) a measurement unit of transaction speed for transactions processing in the Ethereum network, and as of now upgraded to 20.52 TPS.
As per ethtps.info, the current Ethereum TPS went from 15 to 292 TPS after the merger and carries the capacity to have 100,000 TPS as well. Soon after its launch in 2018, the traders were attaching their wallets such as Metamask, Coinbase Wallet, and Fortmatic. As of today, the Uniswap protocol offers tokens and coins of different platforms and does not rely solely on Ethereum. It offers tokens and coins of Ethereum Network, Polygon, Optimism, Arbitrum, and Celo. The need to add all these networks was the rising fee and higher transaction cost. As the transaction costs rose due to higher traffic on the network, many users were paying $100 and even more gas fees. This made small transactions non-existent, and they
were left with nothing in the end. To tackle this soaring issue, Uniswap’s protocol scalability was sent to the peak. Uniswap resolved this issue by deploying Optimism and Arbitrum while the community voted to deploy Polygon at this stage. Polygon is another Layer 2 protocol with higher levels of scalability and interoperability.
When it is about platform fees, Uniswap also charges platform fees alongside a gas fee which goes to validators. Normally Uniswap charges around 0.05% per trade for stable assets and 0.3% per trade fee. Around a 1% fee is charged for exotic pairs.
PancakeSwap- BEP20 DEX
After Uniswap made its popularity among people, a decentralized exchange for Binance Network and BEP20 was not available. To fill this gap, PancakeSwap, another DEX became popular. PancakeSwap differs a lot from the Ethereum network-based tokens and coins. PancakeSwap was launched in September 2020. The protocol runs upon Binance Smart Chain (BSC). You can add a variety of wallets on it, more than that of Uniswap protocol, including Metamask, Trust Wallet, Token Pocket, Wallet Connect, Opera Wallet, Math Wallet, Binance Wallet, SafePal, Coin98, and Blocto. Just like Uniswap, Pancakeswap also employs scalable and agile solutions. But it has a competitive edge on such parameters. PancakeSwap also employs Automated Market Maker (AMM) mechanism to enable Pancakeswap market makers to earn rewards by staking their assets in the pools.
Pancake swap has an edge in terms of a platform fee. It charges a platform fee of 0.25% per trade, which is slightly better than the Uniswap protocol. The competitive edge of PancakeSwap as compared to Uniswap protocol is a significantly lower gas fee. In the nascent stages, BSC could handle 50 transactions per second (50 TPS). The gas fee was always less than $0.35 approximately. In the duel of the Pancakeswap vs. Uniswap race, the Pancakeswap is slightly better in terms of scalability and transaction speed time.
Not only this, but the validation processes are also much smoother and faster than the Ethereum-based Uniswap. In BSC validation, there are only 21 validators, whereas, in the Ethereum network, there are approximately 200,000 validators which makes it more time-consuming, laborious, and expensive. The BSC is made in a way that it offers some advantages of a centralized exchange, but censorship and service interruptions are always lurking in the corner as services might be interrupted if the network goes offline and all the validators go dormant for time being.
That is why many times, the protocols built upon are named Centralized DeFi. Although when it comes to cost and speed, the BSC is better than the Ethereum Network. As of now, Binance Smart Chain Network is offering 300 Transactions per second. When it comes to PancakeSwap fee vs Uniswap the difference is clearly visible and makes the decision slightly difficult and that too with post-merging of the Ethereum Platform.
What to Do Then? Pancakeswap or Uniswap?
There is no definitive answer. Previously we made the decision based on transaction speed and the number of validation nodes. Just as BSC was a smart and better choice to go with lower gas fees but as the Ethereum merger occurred it is not wise to leave Ethereum aside. Although the Uniswap developers and team are not supportive of a hard fork now, they support the migration from Proof of Work (PoW) to Proof of Stake (PoS). Ethereum not just scaled up and increased its pomposity in the market, but the merger serves as a steppingstone at this point.
The gas fee would remain significantly lower, but the trade fee would be significantly lower as the validations would take less time. Nowadays, many crypto trading platforms are swirling up other than the normal DEX protocols such as Bitflex, that provide the traders with minimal low fees and a choice to keep their asses in liquidity pools. Bitflex and many
others are now providing hybrid exchange features, where you can earn fruitful yields and returns on your staking just as in Uniswap and PancakeSwap protocols.
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