- PancakeSwap DEX has launched Version 3 on Ethereum and BNB Chain with improved performance and lower fees.
- Version 3 introduces four different trading fee tiers of 0.01%, 0.05%, 0.25%, and 1%, offering cheaper fees compared to PancakeSwap’s previous Version 2.
- PancakeSwap’s Version 3 aims to balance between low-fee traders and high liquidity providers, with a token pair liquidity pool for each fee tier and introduces a VIP trading rewards program and a position manager feature for enhanced user experience.
DeFi Protocol PancakeSwap released version 3 of its automated market maker platform on BNB Chain and Ethereum on Monday, with performance improvements and lower fees.
A vital upgrade feature is improved capital efficiency, with a shift in how liquidity providers can allocate capital at specific price intervals. The previous version of PancakeSwap distributed liquidity from providers (LPs) uniformly along the price curve of trading pairs, which the platform notes could have been more efficient given that assets typically trade within specific ranges.
V3 enables liquidity providers to select a custom price range to provide liquidity, allowing specific control over capital investments to higher volume trading ranges.
The release also touts the addition of four new trading fee tiers ranging from 0.01% to 0.05% and 0.25% to 1%, a change from V2’s standard 0.25%.
Each token pair can have its liquidity pool for each tier. PancakeSwap expects asset pairs to be drawn to tiers where LP and trader incentives align, with the approach attempting to strike a balance between traders seeking the lowest fees while still incentivizing LPs.
Assets in the 0.01% tier include stable pairs with low impermanent loss (price changes after depositing to a liquidity pool) and prices that typically match.
Higher percentage trading fee tiers are designed for assets with higher impermanent loss or lower liquidity. This mechanism aims to increase fee revenue and provide an incentive for LPs.
PancakeSwap serves an extensive DeFi user base, with over $2.5 billion in total value locked and over 1.5 million unique users.
The platform also revealed upcoming 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 the possibility of receiving a 5% trading fee rebate – which may encourage more platform activity and increase PancakeSwap’s revenue.
The “position manager” feature enables traders to quickly deposit liquidity and optimize that position over time based on fees and rewards.
The tool eliminates the need for third-party integration users to perform manual calculations, allowing them to automatically adjust their positions and earn fee rewards while staying within range.
Both features are still in the works and are expected to be released soon.
