Top 6 BEST Decentralized Exchanges (DEX) For Crypto in 2023

The Rise of Decentralized Exchanges (DEXs)

With the recent combustion of centralized crypto institutions, DEXs are back in the spotlight. Currently, looking at CoinGecko we can see that there are over 500 crypto exchanges, with many of these being centralized ones. CEXes have benefitted from being the first movers and the much more convenient option for beginners, however, DEXes are becoming increasingly popular by the day. So, in this article, we’ll focus on the most popular ones, but first, why would you choose a DEX?

The Advantages of DEXs

One of the major highlights of trading on a DEX platform is that, unlike CEXes, no central authority is involved, therefore giving you full control of your funds and reducing security risks like exchange hacks or even mismanagement of funds. Also, DEXes are better set up to protect your data and privacy, since you don’t have to provide any of your personal details before interacting with the protocol. There are, of course, other benefits like cheaper fees or the ability to be part of a community and participate in the protocol’s governance. These and others are reasons why some opt for DEXs over CEXs. However, they still have to pick a DEX out of the hundreds out there.

Choosing a DEX

A great place to start is a trusted aggregator like CoinGecko. Just navigate to the ‘Exchanges’ option on the top menu and click on Decentralized exchanges to reveal a detailed list that ranks them based on their trading volume. With that said, here are the six most popular DEXs in 2023.

1. Uniswap

At number one we have Uniswap, the most popular DEX and the pioneer of the Automated Market Maker or AMM model, which relies on liquidity pools that aggregate deposits from users to enable trading. Uniswap charges a 0.3% fee for swaps which is split between users who supply the liquidity pools with assets. Currently, there are over 800 coins and 1500 trading pairs on the DEX. Also, towards the end of 2022, Uniswap announced that users could now use the platform to trade NFTs. Fun fact: Uniswap operated for over 2 years without a governance token and finally launched UNI through an airdrop in a bid to compete with a rival AMM, but more on that later.

2. Curve Finance

Meanwhile, let’s focus on Curve Finance, a popular DEX that takes a different approach from your typical AMM. Unlike Uniswap, the protocol is specifically designed for swapping between tokens with identical pegs like stablecoins or wrapped assets like wBTC. This approach by Curve has some advantages. For one, Curve charges a 0.04% fee on trades compared to Uniswap’s 0.3%. The low fees are achieved by trading as efficiently as possible. Another advantage of dealing with less volatile assets is that slippage and impermanent loss are minimized. In other news, the DEX announced its plan to launch a stablecoin known as crvUSD in 2022 and even released a whitepaper for the stablecoin towards the end of the year without a specific launch date.

3. Balancer

Next up we have Balancer, an AMM DEX with a twist, as pools can be composed of up to eight different cryptocurrencies in any ratio, instead of the more typical 50-50 split. This allows liquidity providers to choose their level of exposure to certain assets, however, the downside for traders is that highly asymmetric pools will have higher slippage. Like many DEXs, liquidity providers earn a portion of the trading fee paid to the network via BAL, the protocol’s native token. Fun fact: Users can create different types of liquidity pools, including private, public, and highly-customizable smart pools.

4. Pancakeswap

At number four we have Pancakeswap, the biggest decentralized AMM exchange on BNB Smart Chain. Traders have to pay a fee of around 0.25% of each transaction value. The majority of the fee, around 0.17%, goes to liquidity providers, 0.03% goes to the PancakeSwap treasury, while the rest is used to buy back and burn $CAKE, the protocol’s native token. On top of the AMM, Pancakeswap offers other products like lottery, prediction pools, and even Initial farming offerings which give investors the opportunity of getting early access to new tokens on the DEX.

5. DODO

At number five is DODO, a DEX on the BNB Smart Chain and Ethereum blockchain, which unlike most DEXes uses a Proactive Market Maker or PMM algorithm to facilitate trades. DODO came up with the PMM model in an attempt to solve some problems with AMM such as slippage. DODO’s PMM tries to fix this problem by mimicking the behavior of centralized exchanges, that is, by actively shifting buy and sell orders to align with the latest market price of the crypto assets with the help of oracles. Another unique feature of the protocol is the SmartTrade trading and aggregation system, which finds and compares various liquidity sources to find the best prices between any two tokens, therefore giving traders the most competitive pricing. There are other products like trade mining events whereby users are rewarded for completing certain transactions and Crowdpooling which attempts to distribute new blockchain tokens in a more equal way.

6. Sushiswap

Alright, last but not least is Sushiswap, the OG Uniswap fork that executed one of the most famous vampire attacks in the industry. Sushiswap is a DEX like Uniswap but has some differences. For instance, unlike Uniswap which pays the 0.3% fee to liquidity providers, Sushiswap splits 0.25% among liquidity providers and the remaining 0.05% is distributed to SUSHI token holders. Its offerings have also widened considerably since its early days, as the DEX now provides various yield farming opportunities and recently launched SushiXSwap, a cross-chain AMM to support one-click swaps between different chains.

The Future of DEXs

Those were some of the popular DEXs in the industry today and as you can see each protocol tries to come up with different mechanisms to cater to customer needs better. As it is, DEXs are still niche products aiming to offer trustless and transparent financial services but in time, could give centralized exchanges a run for their money.

Frequently Asked Questions (FAQs)

Q: What is a DEX?

A: A DEX, or decentralized exchange, is a cryptocurrency exchange that operates on a blockchain network and allows users to trade cryptocurrencies directly with each other without the need for a central authority.

Q: What are the advantages of using a DEX?

A: Some advantages of using a DEX include full control of your funds, reduced security risks, protection of data and privacy, cheaper fees, and the ability to participate in the protocol’s governance.

Q: How do I choose a DEX?

A: A great place to start is by using a trusted aggregator like CoinGecko, which provides a detailed list of DEXs ranked based on their trading volume. You can also consider factors such as the range of available coins and trading pairs, fees, and unique features offered by each DEX.

Q: Are DEXs better than centralized exchanges?

A: It depends on your preferences and needs. DEXs offer advantages such as increased security and privacy, but they may have limitations in terms of liquidity and trading options compared to centralized exchanges. It’s important to consider your specific requirements before choosing between a DEX and a centralized exchange.

Q: Can I earn rewards on a DEX?

A: Yes, many DEXs offer rewards to liquidity providers who contribute to the liquidity pools on the platform. These rewards can come in the form of trading fees or native tokens of the protocol.

Q: What is the future of DEXs?

A: DEXs are still relatively new and evolving, but they have the potential to disrupt the traditional centralized exchange model. As more users recognize the benefits of decentralized trading, DEXs could see increased adoption and development of innovative features to cater to a wider range of users.