Best Decentralized Crypto Exchanges for January 2023

  • January 24, 2023
  • 4 Min Read

There was about $48.27 billion in total value locked (TVL) on the top 10 DeFi platforms as of August 2022, according to DappRadar. That’s proof of how plenty of people are using decentralized finance exchanges (DEX) and protocols to invest and earn in cryptocurrency. DeFi platforms are unique because they don’t require users to register for an account, nor do they require the platforms to follow Know Your Customer requirements. You simply log on with your crypto wallet and use them.

There are numerous DeFi exchanges to choose from, so if you’re interested in using this type of exchange, you have options. However, the many DeFi exchanges available are different in their own ways, so make sure you know what the top options are for you before getting started. Here’s what you need to know about the best decentralized exchanges and the main features of DeFi in crypto.

The 8 Best Decentralized Exchanges

1. dYdX: Best for low fees

Difficulty level: Beginner

Beginners who are ready to make the jump into DeFi crypto trading will find a lot to like about dYdX, while experienced crypto traders can enjoy margin trading with 5X leverage on Ethereum.

Users who are navigating the decentralized finance space for the first time will enjoy the user experience dYdX offers. Its sleek interface feels just like a CeFi trading platform and makes it easy to navigate to your portfolio, trade crypto, and track your earned rewards. dYdX uses Zk-Rollup technology to mitigate the cost of Ethereum gas fees for transactions, plus offers no-fee trading for people with monthly trading volume under $100,000.

Pros of dYdX

  • No fees for average users (with monthly trading volume under $100,000)
  • Batched transactions mitigate gas fees
  • Intelligent, sleek interface

Cons of dYdX

  • Few swap trading pairs available
  • Limited margin trading pairs
  • Varying interest rates on yields

Start trading on dYdX or learn more in our full dYdX review.

2. SushiSwap: Best for swapping beginners

Difficulty level: Beginner

Like dYdX, SushiSwap aims to make DeFi more accessible to beginners, and it’s evident in its interface. Bright colors and simple screens make it easy for people to swap their ETH, fiat, or wBTC for hundreds of other tokens.

What truly makes SushiSwap great for beginners in token swapping is its detailed and in-depth tutorials that break down how exactly to use the platform. Not only can people learn to swap their tokens on the Ethereum network, but they can also learn to earn interest in liquidity pools and by staking SUSHI, the platform’s native token.

Pros of SushiSwap

  • Easy for beginners
  • Hundreds of trading pairs
  • Multiple ways to earn interest

Cons of SushiSwap

  • Ethereum network compatibility only
  • Technology is not as sophisticated as the competition
  • Earning yields can drop to 0% for ETH

Start trading on SushiSwap or learn more in our full SushiSwap review.

3. Uniswap: Best swapping platform

Difficulty level: Intermediate

As the foundation that created SushiSwap, Uniswap is the blueprint for swapping protocols. With a total value locked of $6.2 billion, it’s the most-popular swapping platform in DeFi. And Uniswap doesn’t mince words for crypto traders and investors; simply navigate to its platform and you’re greeted with its swapping interface.

Uniswap was also updated to version three in May 2021, with improvements to its smart contracts that enhanced its automated market maker system and increased potential earnings for liquidity providers.

Pros of Uniswap

  • Uses industry-leading AMM systems
  • Low, flat-rate fees
  • Users can set custom price ranges in liquidity pools

Cons of Uniswap

  • Fake coins can be listed on protocol
  • Insufficient liquidity is possible
  • Gas fees apply

Start trading on Uniswap or read our full Uniswap review.

4. Aave: Best DeFi lending protocol

Difficulty level: Intermediate

Aave is one of the best DeFi lending protocols because it offers markets on multiple networks — Polygon, Arbitrum, Avalanche, and Fantom, to name a few. Furthermore, it offers flash loans for borrowers who want to quickly make their trades and repay the loan within the same blockchain.

For lenders, it offers decent lending rates on stablecoins and staking APYs on AAVE will typically hover around 12%, which can be a solid stream of passive income in the DeFi lending space. When using Aave, be sure to choose the network that corresponds to the tokens in your wallet.

Pros of Aave

  • Multiple networks available
  • Offers flash loans to borrowers
  • Numerous ways to collateralize loans

Cons of Aave

  • Limited amount of assets to lend and borrow
  • Only operates on Ethereum
  • APYs on lending are not competitive

Start trading on Aave or read our full Aave review.

5. Curve: Best for stablecoin swapping

Difficulty level: Expert

Designed on the Ethereum network for liquidity pool swapping, Curve allows traders to swap their stablecoins like DAI and USDC with minimal slippage.

What sets Curve apart from other DeFi platforms is its user experience and frontend design, which feels a bit like a Windows 98 program. However, anyone who doesn’t care for the flash of Uniswap and SushiSwap will enjoy candlestick charts, low slippage, and no-frills trading offered by this platform.

Pros of Curve

  • Low-slippage stablecoin swaps
  • Candlestick charts for advanced trading
  • Hundreds of trading pairs available

Cons of Curve

  • Unique interface may be a turn-off
  • Not great for beginners swapping coins
  • Ethereum blockchain-enabled only

Start trading on Curve or read our full Curve review.

6. 1inch: Best DeFi aggregator

Difficulty level: Intermediate

1inch aggregates the best of DeFi platforms in one spot, acting as a marketplace to find the best swapping rates, lowest gas fees, and fastest transaction processing times across the industry. Users can opt for the simple mode to make quick swaps or limit orders, as well as use the standard trading view to see candlestick charts and compare gas fees for trades.

Furthermore, users have so much more customization capabilities with their trading, as 1inch lets crypt investors choose their preferred transaction time. If you don't care about gas fees, instant transactions can happen in less than 10 seconds, but for people who don't mind waiting in return for lower fees, transaction times over a minute are available as well.

Pros of 1inch

  • Finds the lowest fees for trades across DeFi system
  • Full suite of trading and yield products is available
  • High transparency in fees and transaction times

Cons of 1inch

  • Only one liquidity pool to choose from for earning rewards
  • Not suited for beginner crypto investors
  • Transaction times may take longer than other platforms

Start trading on 1inch or read our full 1inch review.

7. PancakeSwap: Best full-featured DeFi platform

Difficulty level: Intermediate

PancakeSwap takes DeFi swapping and gamifies it. With multiple ways to earn CAKE, including price predictions and trading competitions, many users flock to PancakeSwap for a chance to win some prizes. However, it’s not all fun and games on this exchange.

The platform also features farms, liquidity pools, and perpetuals, so there are plenty of opportunities to earn with PancakeSwap — as long as you know what you’re doing. PancakeSwap’s platforms for perpetuals, games, and liquidity require deep knowledge of crypto trading and shouldn’t be taken lightly.

Pros of PancakeSwap

  • Higher APYs than competitors
  • Earning through price prediction
  • Multiple yield farms for potential earning opportunities
  • Audited by multiple security firms

Cons of PancakeSwap

  • Games in crypto may promote gambling — and cause losses
  • Operates on Binance Smart Chain, so bridging tokens from Ethereum may be required

Start trading on PancakeSwap.

8. Maple Finance: Best for liquid staking

Difficulty level: Beginner

Maple Finance is a lending protocol that offers decent interest rates of up to 10% annually, and it only lends to institutional investors who can borrow a minimum of $1 million. Institutional borrowers have much lower rates of defaults than retail borrowers, so your funds are safer with Maple Finance than many rival lending protocols.

Maple also supports staking with no lock-up periods, so you can redeem your staked assets anytime you want. However, it only supports staking for the platform’s native MPL token. For lending and borrowing, it only supports tokens hosted on the Ethereum and Solana blockchains, primarily USDC and wETH.

Pros

  • Supports liquid staking
  • Intuitive user interface

Cons

  • High minimum borrowing amount
  • Supports only Ethereum and Solana-based tokens

Start trading on Maple Finance or read our full Maple Finance review.

  • What Are Decentralized Exchanges?

    Expand to learn more

    Decentralized finance exchanges are crypto exchanges that do not run with an intermediary party to facilitate trades. Instead, users typically interact with liquidity pools funded by other users making their trades. Because DeFi exchanges have no central authority calling the shots or executing transactions on users’ behalf, the power is back in the traders’ hands.

  • How Decentralized Exchanges Work

    Expand to learn more

    Decentralized exchanges work on smart contracts, which are code-operated programs that execute specific actions when certain conditions are met. Put simply, they run on “if/when … then” logic. For example, if/when a user connects their wallet to a DeFi exchange and initiates a swap from ETH to DAI, then the exchange will complete the transaction to extract the selected amount of ETH from their wallet and deposit the correlating amount of DAI.

    Smart contracts are the heart of DeFi platforms, as using them removes the need for the platform to act as a third-party in transactions since they execute the necessary steps to record the actions on the blockchain. It’s important to note that as with any code, bugs and exploits are possible, as evident in recent Solana and Nomad bridge hacks.

  • Decentralized Exchanges vs. Centralized Exchanges

    Expand to learn more

    There are two options to consider when participating in web3 with crypto: decentralized exchanges and centralized exchanges. While both types have their benefits and drawbacks, there are also plenty of differences between DeFi and CeFi exchanges.

    First, DeFi exchanges are anonymous. When you use a DeFi exchange, you connect your wallet and can start trading right away. However, CeFi exchanges require identity verification and account creation to comply with federal regulations.

    DeFi platforms are suited for quick trading, as users can jump from platform to platform without signing into an account, but CeFi platforms require login information and personal data to verify your identity before you can get trading. However, decentralized exchanges typically have no options for purchasing crypto with fiat, but centralized exchanges allow purchases with credit cards, debit cards, and bank account ACH transfers.

Here are some common differences between decentralized and centralized exchanges:

Decentralized exchanges

  • No identity verification required
  • Users can use governance tokens to vote on platform updates
  • Low risk of platform failure — but smart contract exploits are a risk
  • Non-custodial, so users keep control of their tokens
  • Open to all
  • No fiat on-ramp
  • No tax reporting help or forms

Centralized exchanges

  • Know-Your-Customer (KYC) process required
  • Not available in every state
  • Exchange has custody of your tokens
  • Risk of platform failure and asset freezes
  • Can purchase crypto with fiat on most platforms
  • Typically provides tax forms for filing

Pros And Cons of Decentralized Exchanges

Pros

  • No identity verification required
  • Community-driven updates
  • Available everywhere

Cons

  • Smart contracts are exploitable
  • No canceling transactions or safety nets for users
  • Scams and phishing are more common
  • Pros of Decentralized Exchanges

    Expand to learn more

    No ID verification

    Decentralized exchanges operate outside of federal regulations, so the KYC does not apply to them. Users just have to connect a compatible wallet to trade and transact on DeFi platforms.

    Community-driven updates

    Many DeFi platforms and exchanges mint governance tokens to users as rewards for staking or lending certain assets. With these governance tokens, they can vote on proposed potential updates and the overall direction of the platform. For example, the Polkadot platform uses DOT as its token, and DOT holders can use it to vote on referendums.

    Available everywhere

    Centralized exchanges need federal licenses to operate in each state, but decentralized exchanges are available everywhere. DeFi exchanges are able to avoid some regulatory guidelines because there’s no central authority acting on behalf of the platform.

  • Cons of Decentralized Exchanges

    Expand to learn more

    Exploitable smart contracts

    DeFi exchanges run on smart contracts, and many platforms make their smart contracts open-source, so anyone can view them. While this helps the web3 world as a whole, it also means that malicious hackers have the chance to find exploits to drain funds and attack the platform.

    No safety nets

    DeFi is the Wild West of finance — you can make money but then lose it just as easily. There are no safety nets for users. There are no take-backsies, no options for canceling transactions, no customer service reps, or refunds for mistakes.

    Scams and phishing

    Many people take the opportunity of anonymity and new-user naivety to scam people. It’s crucial to always verify transactions before execution and never follow links people send you.

Final Thoughts on Decentralized Exchanges

DeFi exchanges make for an easy on-ramp to trading crypto without lengthy KYC processes or account creation. Simply connect a compatible wallet to the DeFi exchange of your choice and begin trading. While it’s great to be able to trade crypto anonymously, be aware of the lack of safety nets and potential malicious actors in the space. As always, evaluate your risk comfort level, do your own research, and only invest funds in crypto that you are comfortable losing.

Frequently Asked Questions

  • What is the best DeFi exchange?

    Expand to learn more

    The best DeFi exchange for you will depend on your personal investing goals and experience with cryptocurrency. However, if you’re looking for the best swapping platform, Uniswap may be worth considering. Or, if you’re looking for the best lending platform, it may be worth it to consider Aave.

  • What is the biggest decentralized exchange?

    Expand to learn more

    With a 24-trading volume of a little over $1 billion, Uniswap is the biggest decentralized exchange. Trading volume represents the value of trades happening in any given period in a DeFi exchange — the higher the amount, the more people using the exchange, signaling trust to the general public.

  • Will I owe taxes on profits from DeFi exchanges?

    Expand to learn more

    Yes, you will owe taxes on any profits you make using a DeFi exchange. The IRS views crypto profits like any other type of income, so any profits that you receive as a result of trading, staking, or yield farming on a DeFi exchange must be reported to the IRS. However, DeFi exchanges won’t prepare those tax documents for you, so it’s up to you to track your earnings and losses for tax purposes. You can also consult with a tax professional to determine what you need to prepare for tax season.

Contributors

  • Avatar of Courtney Mikulski

    Courtney Mikulski specializes in cryptocurrency, personal finance, and credit cards. Her work has appeared in publications like Bankrate, The Simple Dollar, and CreditCards.com.

  • Avatar of Angelica Leicht

    Angelica specializes in crypto and personal finance content. Her work has appeared in publications such as Bankrate, Forbes, The Motley Fool, The Simple Dollar, The Houston Press, Dallas Observer, The Village Voice, and others.