PancakeSwap, a decentralized exchange (DEX) with over 1.5 million unique users, introduced Version 3 (V3) on Ethereum and BNB Chain on Monday.
The upgraded platform will offer the cheapest fees for on-chain trades among counterparts such as SushiSwap and Uniswap and increased returns for liquidity providers (LPs), the exchange's developers told CoinDesk on Sunday.
PancakeSwap V3 also introduces features that enhance the platform's capital efficiency. These include allowing liquidity providers to concentrate their capital on smaller price ranges, a feature that results in higher fee earnings from the same amount of deposits, the developers said.
V3 will introduce four different trading fee tiers: 0.01%, 0.05%, 0.25%, and 1%. V2 offered a single tier of 0.25%. Each token pair can have a liquidity pool for each fee tier, with asset pairs gravitating toward the tier where incentives for both liquidity providers and traders are most rewarding.
This approach is designed to ensure a balance between traders paying the lowest fee tier while still incentivizing the highest possible liquidity from LPs.
In the future, PancakeSwap V3 will introduce two new features: A V3 “VIP” trading rewards program and a position manager feature.
The VIP program is a tiered system that rewards traders for their trading volume with exclusive benefits such as a chance to get up to a 5% trading fee rebate – which may incentivize more platform activity and improve PancakeSwap’s revenue.
The position panager feature will allow traders to easily deposit liquidity and optimize that position, based on fees and rewards, over time. The tool eliminates the need for manual calculations for third-party integrations, allowing users to automatically adjust their positions and earn fee rewards while staying within range.
Both these features are currently in development and are expected to be introduced soon.
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PancakeSwap V3 is also compatible with all tools built for Uniswap version 3, currently the largest DEX by daily users and trading volumes. PancakeSwap had over $2.5 billion in total value locked (TVL) as of Monday. Uniswap had $3.9 billion, DeFiLlama data shows.
