A bunny that bakes cakes
Easter is coming. I want to talk about the animal of the festival, the bunny! I’m always wondering why bunny and eggs are put together for Easter since bunny does not generate eggs and can be misleading for children. A plausible explanation is that bunny symbolizes vital reproducibility and gives birth to a big litter of babies. In crypto, there is a bunny called Pancake Bunny. His mission is “Help CAKE lovers get more CAKES.” I’m convinced it is a cousin of PancakeSwap (cross-species is possible, I guess). Its job is to reproduce profits out of profits, use CAKE to make more CAKES!
Let’s take a look at where Pancake Bunny stands in the ecosystem.
Pancake Bunny is a Yield Farming Optimizer for farms mainly on Binance Smart Chain. Bunny works very closely with PancakeSwap, (I really believe they are cousins). Let’s take PancakeSwap as an example to illustrate Bunny’s role.
PancakeSwap is a decentralized exchange using an AMM (Automated Market Maker) model. A non-custodial exchange allows people to exchange between various assets provided by liquidity providers, aka people who supply liquidity. The price to buy or sell is determined by a formula. Liquidity providers earn passive income through trading fees and yield farming. Pancake Bunny comes into play for the yield farming part, maximizing liquidity providers’ gains. When you supply a pair of tokens into a pool (or farm), you get an LP token representing your share and enables you to claim trading fees and rewards. Yield farming is the practice of staking or locking up LP tokens to generate rewards.
The rewards of yield farming in PancakeSwap works like this.
The rewards maximized by Bunny work like this.
The most evident advantage in using Pancake Bunny is Auto Compounding. While in PancakeSwap, you need to manually compound the interests earned once in a while, Bunny does it for you automatically and reinvest yields according to the algorithm that calculates the best profit. $BUNNY, Pancake Bunny’s token is also given as a reward.
How to maximize gains on Pancake Bunny?
To incentivize the circulation of $BUNNY, Pancake Bunny has a series of measures that benefit $BUNNY holders. First is the fee structure. A 30% performance fee is applied at the moment of withdrawal from the farms. The majority of these fees goes to reward staking $BUNNY. The $BUNNY staking Pool has no withdrawal fee and no performance fee.
It’s worth mentioning that for every 1 $BNB earned through performance fees, some $BUNNY are minted and given to the respective liquidity provider.
When withdraws from a pool (CAKE-BNB, ETH-BNB…), 30% of profits will be collected (Performance fee) and given as $BUNNY, so the liquidity provider will get the respective LP Token and $BUNNY reward, calculated as every 1$BNB earned through fee, 10 $BUNNY in reward. The ratio is 1:10, so 0.2$BNB — 2 $BUNNY, 0.05$BNB — 0.5 $ BUNNY…etc
In the CAKE auto-compounding pool, the BUNNY reward ratio is 1:5, for every 1BNB in fees collected, 5 BUNNY in reward.
To add another layer of maximizing, the Maximizer farms on Bunny take the original compounded farm’s profits and put it into the CAKE auto-compounding farm. The generated profits will be in $CAKE instead of gains still represented in LP token in auto compounding farms. To make this Maximizer really interesting, it is essential to have CAKE pool APY high and a positive outlook of CAKE’s value increase in the foreseeable future.
However, when investing in liquidity pools, the risk of impermanent loss always exists. It could be compensated by the profits generated from yield farming and optimizer like Bunny. It needs another article to dive into it.
It is interesting to see more applications are coming out to enrich the ecosystem of Defi. Bunny does primarily one thing, compound interests. But it relies on other exchanges for its existence. Will such implementation be integrated into the Defi exchange?