The popular decentralized cryptocurrency exchange PancakeSwap announced on March 15th the release of its fourth version codebase and technical review. The new version will allow for special liquidity pools and flash contracts aimed at reducing transaction costs for users and preventing impermanent losses for liquidity providers. The announcement also mentioned the creation of a development fund to assist in further enhancements of the PancakeSwap protocol.
Noteworthy Steps from the Pancake Team
PancakeSwap is notable as the third-largest decentralized cryptocurrency exchange by total value of cryptocurrency locked in contracts. According to the blockchain data analysis platform DefiLlama, it currently holds over $2.3 billion in assets spread across nine different networks.
According to the announcement, the new version will be available on the Ethereum and BNB networks in the third quarter of 2024. The team has integrated a feature called hooks, which are customizable plugins that can be created by independent developers for specific liquidity pools.
The announcement also states that the new version supports liquidity ledger pools. Unlike traditional pools that follow the X*Y = K formula, liquidity ledger pools use the X + Y = K formula. PancakeSwap claims that this new type of pool allows liquidity providers to avoid impermanent losses and investors to trade within a box without being affected by price impact.
How Will the Process Continue?
Developers have also made changes to minimize transaction costs, including transitioning to a singleton model that consolidates all pools into a single contract. They claim this will reduce the cost of multi-hop transactions that require multiple swaps to complete. Additionally, the v4 protocol is said to implement flash accounting, which optimizes the accounting process by calculating net balances for a batch of transactions and settling them collectively, further reducing transaction costs.
The team stated that the new code has been released under an open-source license. Developers interested in forking the code can apply to become affiliates and be officially recognized by the team. In addition, PancakeSwap is launching a $500,000 developer program to fund independent developers to create hooks for v4.
As the crypto user base grows, decentralized exchanges are racing to implement new features to capture market share. On February 27th, Uniswap announced the release of a web extension wallet integrated with its exchange. In November 2023, the exchange announced a governance voting feature that allows PancakeSwap’s (CAKE) token holders to vote on which polls receive additional rewards.
