PancakeSwap V4 Update Overview For Those Who Plan to Fork

03 May 2024

Nowadays, innovation is everything. Among decentralized exchanges, PancakeSwap V4 stands out as one of the leading platforms. Its latest version represents the next evolution in DeFi, providing numerous benefits and opportunities for creators and traders. This article offers an overview of PancakeSwap V4, highlighting its key features and advancements that distinguish it in the DeFi space. Next, we will explore the advantages of creating a decentralized exchange like PancakeSwap V4 and how collaborating with Rock'n'Block can enhance your path to DEX success. Get ready as we venture into the core of DeFi innovation with PancakeSwap V4 and learn how to create a decentralized exchange like PancakeSwap with expert help.

PancakeSwap V4 Brief Overview

Let's rewind to 2023 when PancakeSwap V3 hit the scene, introduced the Concentrated Liquidity Automated Market Maker (CLAMM) model from Uniswap. This model allowed liquidity providers to target specific price ranges for their assets, making capital use more efficient and increasing liquidity for traders.

Learn about how to fork PancakeSwap in our guide: Create a DEX like PancakeSwap: A Step-by-Step Guide!

Zooming ahead to PancakeSwap V4, officially announced on March 15, 2024, the focus is on adaptability and scalability. The announcement states that the updated version will be released on both the Ethereum and BNB networks in Q3 2024. The Accounting logic has been separated from the AMM logic with a three-tiered setup – the Vault, Pool Managers, and Hooks. This makes it easier to integrate evolving AMM paradigms without needing to rebuild the whole protocol from scratch.

Unlike its older sibling, PancakeSwap V4 is all about giving creators more flexibility. It introduces hooks, which are customizable add-ons that allow adjustments to fee structures, oracles, and other DEX development features. Additionally, each pool can have its own unique hook smart contract, allowing greater customization. PancakeSwap also made things smoother on the gas efficiency by giving each AMM implementation its own Singleton setup. This means new pools setup and multi-hop transactions would be cheaper. And to top it all off, they implemented Flash Accounting, a method of settling transactions in batches. This not only saves on gas, but also speeds up the whole process. A win-win solution.

Now let’s delve into these new features deeper!

PancakeSwap V4: The Next Evolution of DeFi

PancakeSwap V4 has just landed on the DeFi scene. This latest version of the PancakeSwap protocol brings a whole new level of flexibility and modularity, tailored to suit the ever-evolving needs of the decentralized finance (DeFi) ecosystem. Let's explore what sets it apart and makes it an attractive option for creating a decentralized exchange like PancakeSwap V4.

What's New?

According to the PancakeSwap documentation, the new version brings a lot of new features and opportunities for all those who want to create a decentralized exchange like PancakeSwap V4, platform users and the DeFi ecosystem as a whole.

Hooks: Your Customization Playground

PancakeSwap V4 introduces Hooks, which are externally deployed contracts that act as customizable add-ons. They enable developers and protocols to execute predefined logic during key actions within a pool's operation. Hooks bring a new level of customization to liquidity pools, allowing:

Dynamic fees that start as low as 0%.
Advanced trading tools such as limit orders, take-profit orders, and Time-Weighted Average Market Making (TWAMM).
Generating a consistent revenue stream for developers through hook fees, incentivizing innovation.

Diverse Pool Types for Every Need

Creating a decentralized exchange like PancakeSwap V4 is all about variety, as its offering multiple pool types to suit every trader's needs:

CLAMM (Concentrated Liquidity AMM) with Hooks: Explore precise price ranges with this model while enjoying the benefits of customization through Hooks.
LBAMM (Liquidity Book AMM) with Hooks: The Liquidity Book AMM model with hooks operates on a constant sum formula within each bin, which eliminates impermanent loss for LPs within individual bins and enables zero price impact trades.
Future Pool Types with Hooks: PancakeSwap V4's modular architecture is designed to accommodate future AMM designs, ensuring adaptability to evolving market demands.

Donate Feature

The Donate feature lets users directly incentivize liquidity providers in-range, giving them a well-deserved boost in returns and encouraging more participation.

Singleton

PancakeSwap V4 simplifies processes with the Singleton contract design. All pools are now consolidated, reducing pool creation costs by up to 99%. Additionally, gas costs for multi-hop swaps have decreased significantly.

Flash Accounting

Who doesn't love optimization? Flash Accounting streamlines the accounting process by crunching net balances for batches of transactions, cutting down on gas consumption and speeding up the operations.

ERC-6909 Support: Token Time Saver

ERC-6909 suggests a simplified multi-token standard for Ethereum and compatible blockchains. Already adopted in projects like Uniswap V4, it aims to streamline implementation and enhance flexibility in smart contract development through its modular design. Now you can create and manage both fungible and non-fungible tokens in one smart contract.

Native Gas Token Support

Finally, PancakeSwap V4 introduces support for native gas tokens, allowing direct trading pairs and reducing gas costs. This can lead to significant savings.

Open-Source and Developer Program

PancakeSwap V4 is an open-source platform that invites developers to modify and experiment with the code. Additionally, there is a $500,000 USD Developer Program available, which includes Growth Campaigns, Hackathons, and more.

PancakeSwap V4 is not just an upgrade, but a DeFi revolution. Its customizable features, diverse pool types, and developer-friendly ethos are paving the way for a brighter and more rewarding future in decentralized finance. If you're looking to create a decentralized exchange like PancakeSwap, PancakeSwap V4 offers the perfect toolkit to kickstart your journey.

Benefits of Creating a DEX like PancakeSwap V4

Let's uncover the exciting benefits PancakeSwap V4 offers for developers, DeFi protocols, traders, and liquidity providers in their quest to create a decentralized exchange like PancakeSwap:

For Developers Who Want to Create a Decentralized Exchange like PancakeSwap

Proven Code Base: One of the most significant advantages of creating a decentralized exchange like PancakeSwap is the access to a proven code base. PancakeSwap's robust infrastructure has been tried and tested by millions of users, ensuring reliability and security from the get-go. Developers can leverage this solid foundation to expedite the development process and focus on customizing their DEX to meet specific needs.
Time and Cost Savings: Building a DEX from scratch can be time-consuming and resource-intensive. By choosing to create a decentralized exchange like PancakeSwap, developers can save valuable time and resources. With a pre-existing code base and comprehensive documentation, developers can significantly reduce development cycles and associated costs, allowing them to bring their DEX to market faster and more efficiently.
Built-in Features and Functionality: Creating a decentralized exchange like PancakeSwap grants developers access to a plethora of built-in features and functionality. From diverse pool types to ERC-6909 support, PancakeSwap offers a comprehensive suite of new features that can be tailored to suit the unique requirements of any project.
Seamless Integration with DeFi Ecosystem: In the interconnected world of DeFi, interoperability is key. By creating a decentralized exchange like PancakeSwap, developers can seamlessly integrate their DEX with other DeFi protocols and platforms. This interoperability opens up a world of possibilities for cross-platform collaboration and liquidity sharing, ultimately enhancing the overall DeFi ecosystem.

Elevating the Trading Experience For Users

Dynamic Fees: Creating a DEX like PancakeSwap V4 enables dynamic fee structures, allowing traders to enjoy customized fee experiences tailored to their preferences. With Hooks, traders can benefit from flexible fee options, enhancing their trading journey.
Advanced Trading Tools: Users can enhance their trading strategies using advanced tools such as limit orders, take-profit orders, and TWAMM through Hooks.
Reduced Gas Fees: Forget about high gas fees with PancakeSwap V4. The addition of Singleton and Flash Accounting significantly reduces gas costs, ensuring a seamless trading experience. Consolidated pools and optimized accounting processes minimize gas-intensive token movements, promoting efficiency and cost savings.
Zero Slippage Trades: With support for multiple pool types, including the Liquidity Book model, traders can enjoy zero slippage trades within specific bins. PancakeSwap V4 prioritizes the best possible trading experience, minimizing slippage and maximizing trade efficiency.

Maximizing Returns For Liquidity Providers

Enhanced Capital Efficiency: PancakeSwap V4 advances the concept of concentrated liquidity, allowing liquidity providers to optimize capital allocation within specific price ranges. The integration of Hooks allows LPs to implement custom features for optimized liquidity management, maximizing returns and efficiency.
Mitigated Impermanent Loss: PancakeSwap V4 aims to mitigate impermanent loss and enhance liquidity provider earnings through innovative strategies. The platform aims to double the net trading fees earned by LPs, offering stable profitability and reducing reliance on token incentives.
Gas Savings: LPs benefit from significant gas savings and operational efficiency through Singleton and Flash Accounting. PancakeSwap V4 prioritizes cost-effective solutions, ensuring LPs can maximize returns while minimizing transaction costs.

Want to create a DEX like leading ones? Check out our related articles:

Create a DEX like Uniswap: Overview and Forking Guidelines

Create a DEX Like GMX: Perpetual Exchange Guide

With PancakeSwap V4, developers have the opportunity to create decentralized exchanges like PancakeSwap that offer unparalleled customization, access to a vast user base, and revenue-generating potential. Whether you're a developer, DeFi protocol, trader, or liquidity provider, PancakeSwap V4 opens doors to a world of possibilities in decentralized finance.

Create a Decentralized Exchange like PancakeSwap with Experts

PancakeSwap V4 is not just an upgrade, but a significant improvement in terms of flexibility, scalability, and efficiency. Its modular setup, customizable features, and gas-saving tricks make it a versatile decentralized exchange. However, creating a decentralized exchange like PancakeSwap V4 requires a deep understanding of blockchain technology, smart contract development, and DeFi principles. From deciphering documentation to navigating the intricacies of the code base, the process can be daunting. However, with the expertise and guidance of Rock'n'Block, the journey becomes significantly smoother. Our team of seasoned blockchain developers and DeFi experts possesses the knowledge and experience needed to navigate the complexities of DEX development.

Our comprehensive suite of tools and services empowers you to create a DEX that not only mirrors the success of PancakeSwap but also introduces novel features and functionalities of V4 to set your platform apart in the competitive DeFi landscape. From smart contract development to UX/UI design and security auditing, Rock'n'Block provides end-to-end support at every stage of the development process, ensuring a seamless and successful launch of your DEX. Partnering with Rock'n'Block means embarking on a journey of innovation and growth, with a trusted ally by your side every step of the way.

So ready to dive in and see what you can cook up? Let's make some pancakes together!