The top 5 decentralized cryptocurrency exchanges

[Rony Khan]

Uniswap
Most popular

Uniswap is the world's biggest decentralized exchange. You can use Uniswap to buy, sell, and trade ERC-20 tokens on the Ethereum blockchain.

To start using Uniswap, plug in your Ethereum wallet. You can start trading cryptocurrencies and adding your crypto into Uniswap's liquidity pools to generate yield.

Because Uniswap is so popular, the platform provides ample liquidity for users to carry their trades. In addition, the exchange is considered very user-friendly!

Curve
Best for stablecoins

The curve is a decentralized exchange originally designed to allow users to swap stablecoins of similar value. This design helps to help protect liquidity providers and mitigate impermanent loss.

The curve is considered one of the safest and most trusted decentralized exchanges. As a result, many investors put their stablecoins with Curve to earn low-risk staking rewards!

1inch
Best for low prices

Unlike the other decentralized exchanges listed, 1inch is a decentralized exchange aggregator. That means the platform searches different decentralized exchanges on the Ethereum blockchain to find the lowest fees and best prices for your trades.

One inch allows users to buy, sell, and trade ERC-20 tokens. The exchange even allows you to purchase with a debit/credit card through Moonpay!

PancakeSwap
Best for Binance Smart Chain

PancakeSwap is a decentralized exchange built on the Binance Smart Chain (BSC). The platform was founded in 2020 when Ethereum-based exchanges like Uniswap suffered from slow transaction speeds and high gas fees.

Today, PancakeSwap has billions of dollars in liquidity. The straightforward UI lets users buy, sell, and trade BSC-based assets. Users pay very low blockchain gas fees because the platform is built on the BSC.

dYdX
Best for derivative trading

dYdX is a decentralized exchange that supports lending, borrowing, perpetual trading, and margin trading. These transactions are unavailable on other decentralized exchanges, making dYdX a good option for traders looking to take on more risk.

In addition, dYdX has partnered with Starkware — an Ethereum Layer 2 scaling solution. As a result, the exchange features low blockchain gas fees.

What is a decentralized exchange?
A decentralized exchange allows users to buy, sell, and trade cryptocurrencies without a centralized intermediary to provide liquidity and verify transactions. Instead, other users provide liquidity, and transactions are verified through the blockchain.

This arrangement allows crypto users to make transactions without the need for financial intermediaries like centralized exchanges or banks.

Centralized vs. decentralized exchanges
Centralized exchanges like Coinbase are typically considered better for new investors who may not understand the complexities of decentralized finance. Unlike decentralized exchanges like Uniswap, centralized exchanges typically have easy UI, support chat functionality, and can be linked to your bank account.

The advantages of decentralized exchanges
There are many reasons why investors may choose to use a decentralized exchange.

No custody
Centralized exchanges take custody of your cryptocurrency. This can lead to situations like the FTX collapse, where millions of investors lost access to their crypto. On the other hand, decentralized exchanges allow users to trade while confiscating their crypto in their wallets.

Larger selection of cryptocurrencies
Centralized exchanges often take time to approve new cryptocurrencies for trading. As a result, decentralized exchanges often have a larger selection of coins to buy, sell, and trade.

Censorship resistant
Because centralized liquidity providers control decentralized exchanges, no intermediary can censor and restrict transactions.

What important factors should I consider when choosing a cryptocurrency exchange?
There are several factors you should consider when choosing a decentralized exchange.

Liquidity
Liquidity measures how quickly your crypto-assets can be swapped for other crypto-assets. If your exchange has low liquidity, you may have trouble buying and selling different cryptocurrencies.

Reputation
To protect your crypto holdings, choosing a decentralized exchange with a reputation for trustworthiness and security is important.

User interface
A good user interface allows you to make more efficient trading decisions. Because what constitutes a good user interface is somewhat subjective, you should try multiple exchanges to see which works best for you.

How do I get started with a decentralized wallet?
You can follow this three-step process to get started with a decentralized exchange.

Get started with a wallet: Find one that allows you to interact with decentralized protocols like Uniswap. MetaMask and Coinbase Wallet are two popular wallets with easy-to-use Google Chrome extensions.
Fund your browser wallet: You'll need cryptocurrency to start making transactions on a decentralized exchange. You should buy cryptocurrency on a centralized exchange and transfer it to your wallet to get started.
Connect your wallet to a decentralized exchange: Once you've funded your wallet, you can start making trades and providing liquidity to your decentralized exchange of choice.
Do I need to pay tax on decentralized exchange transactions?
Though transactions on decentralized exchanges are pseudo-anonymous, you should report your cryptocurrency taxes.

Remember, transactions on blockchains like Bitcoin and Ethereum are publicly visible. In past years, the IRS has worked with contractors like Chainalysis to analyze blockchain transactions and crack down on crypto tax fraud.

If you're looking for an easy way to simplify the tax reporting process, CoinLedger can help. The platform integrates with Ethereum, Binance Smart Chain, and Solana blockchains. Just enter your wallet address and let the platform pull your transactions automatically!

Get started with a free account today.

Frequently asked questions
What's the best-decentralized exchange for beginners?

Uniswap is a great option for investors new to decentralized exchanges. Uniswap is the world's most popular decentralized exchange and has an easy-to-use interface.

Do decentralized exchanges report to the IRS?

Currently, decentralized exchanges do not report to the IRS. However, transactions on blockchains like Ethereum and Bitcoin are publicly visible and permanent.

What is the cheapest decentralized exchange?

Because 1-inch aggregates prices from different decentralized exchanges, the platform can help you find the lowest prices for trades.

Is Binance a decentralized exchange?

Binance is not considered a decentralized exchange. When you trade on Binance or Binance.US, a centralized intermediary handles, executes, and verifies your trades.

[Amirah]

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