Food-related swaps have flooded the crypto market. Even though many of them have died as a result of rug pulls and smart contract exploits, some are managing to keep afloat. One such example is PancakeSwap, a pretty successful platform with over $150 million cap. The CAKE token price is growing ($1.50), its forums are overflowing with positive reviews - total joy and euphoria. But what if we take a look at the dark side of PancakeSwap?
Are you safe?
Let’s answer first what PancakeSwap is. It is a decentralized exchange for swapping BEP20 tokens on BINANCE Smart Chain. PancakeSwap uses an automated market maker (AMM) model, where users trade against a liquidity pool. Basically, just another food swap built on BSC.
Why did they choose Binance Smart Chain? Partially, for the hype! But mostly because it’s an innovative solution for the DeFi ecosystem, an alternative to the overloaded Ether network. BSC offers faster block times (~5 sec), lower fees and versatile functionality.
But does BSC grant you safety? No, everything is stacked in Pancake’s favor. To be fair, the last two months have been smooth for PancakeSwap, but let’s dig a bit deeper...
Exploit, exploit, exploit!
Usually, when it comes to swaps, we pay attention to audits. If some respectable company performs an independent smart contract audit, the project can be counted as reliable. So it was with PancakeSwap, which was audited by Certik (actually, “partially” audited). And the smart contract has an impressive grade. But in November 2020, something went wrong - their smart contract got smashed!
The exploit appeared like a hurricane on a sunny day. Initially, PancakeSwap had 2 native tokens - Cake and Syrup. You had to stake Cake in a 1:1 ratio to get Syrup tokens and then do farming. When you unstaked Cake, Syrup got burned. And that’s where the exploit came from. Some users found how to trick the smart contract and withdraw Cake tokens without burning Syrup. And they did it a massive amount of times. At least 13,000,000 new Syrup tokens were created and sold for at least $500,000 on the PancakeSwap exchange.
Source: medbid.medium.com
What comes next? Yes, Syrup’s price crashed in seconds! People lost millions of dollars in the blink of an eye. And that’s when the Pancake developers had to act quickly and wisely! And they did...
Community is the most precious asset!
Source: medbid.medium.com
Chefs discontinued using Syrup immediately. There was a moment of silence. Developers didn’t even plan a hunt for the exploiter, they just called him a ‘bad actor’ and left everything as it was. But the community had no intentions of stopping - a vote was launched to compensate for the losses of Syrup holders. Guess what Pancake’s management did? They stepped away, saying that Syrup votes were no longer valid.
Chefs dodged responsibility for the incident in every possible way - the best one was feigning ignorance. It took several days for the Pancake team to come up with their official response and it was painful for Syrup holders. Its content in a few words:
- Sorry, but we f*cked up.
- We somehow got audited by Certik.
- Yes, we’ll launch the compensation vote.
- But no, Syrup holders won’t be deciding anything.
- Cake holders (who don’t give a damn) will decide your destiny for you.
- And yes, we knew about the smart contract flaw.
- Best wishes, love you all (except for Syrupees).
Nice guys. They really did launch a vote but it cannot be reached for some reason, neither can we see the results. But the project survived the crisis and is doing pretty well.
‘Realistic’ APR’s of Pancake Swap
Two months is a long time in the crypto market, several generations of hamsters have changed. The dirty business of PancakeSwap is now forgotten! But the red flags are still there. Judge for yourself:
- The project is driven by the same Chefs who would stab you in the back if something went wrong. The community’s opinion is not a big deal to them.
- The Platform’s APR’s are enormously BIG - up to 300%. It sounds risky and looks more like a hamster’s ticket.
- PancakeSwap was audited by Certik and as we know, they don’t give any guarantees of security. At all!
Should you invest in PancakeSwap? Let’s leave this question open.
Rug pull warning!
We are not saying Pancake will end up being an exit scam, we’re just saying that there’s always a possibility. Their dirty reputation remains dirty. We saw several multi-million rug pulls in the DeFi space over the last few months - this is the market reality. If something bad happens to Pancake’s smart contract or some Chef decides to grab ‘easy money’ off the table, the community is the last thing they will care about. Just keep that in mind.
Disclaimer: We don’t want to harm PancakeSwap and we don’t give any financial advice. We only want to raise the DeFi community’s awareness. Investing is always a risk. Using the example of the mentioned project, we want to show that everyone makes mistakes. But how you react to mistakes is as important as the mistake itself. PancakeSwap can go on to have a long and prosperous life, so too its users. But not so much the Syrup holders.
