There is no secret that cryptocurrency adoption is booming in Kenya. From Binance P2P traders to small businesses accepting crypto payments, crypto is now a huge topic in the country. Many people are discovering decentralized exchanges (DEXs), which allow them to trade crypto directly from their wallets without using a centralized platform. But before you rush in, it’s important to answer this question: What are the major downsides of decentralized exchanges?
So, in this article, I’ll look keenly into the question of what are the major downsides of decentralized exchanges.
By breaking down the major downsides of decentralized exchanges, we’ll also explore why they matter to you as a Kenyan trader, and share tips on how to protect yourself while trading.
But first things first …
What Are Decentralized Exchanges?
Decentralized exchanges (DEXs) are platforms that let users trade cryptocurrencies directly with one another — no bank, broker, or centralized exchange (CEX) involved.
Unlike centralized exchanges such as Binance or OKX, where you need to register and trust the exchange to hold your funds, a DEX allows you to stay in full control of your private keys. While this gives you more freedom, it also introduces unique risks.
Top Decentralized Exchanges for Kenyan Traders
Despite the challenges, many Kenyan traders still use decentralized exchanges because of their flexibility, privacy, and access to tokens not available on centralized platforms.
Below are some of the top decentralized exchanges that Kenyan traders can consider, along with what makes each platform unique.
Uniswap
Uniswap is one of the largest and most trusted DEXs in the world, built on the Ethereum network. It allows you to swap thousands of ERC-20 tokens directly from your wallet.
For Kenyan traders, Uniswap is ideal if you’re looking for deep liquidity and access to trending Ethereum-based tokens. The downside is that gas fees can be high, so it’s best used for larger trades or during low network congestion periods.
PancakeSwap
PancakeSwap runs on the Binance Smart Chain (BSC), which is cheaper and faster than Ethereum. This makes it a favorite among Kenyan traders who want to avoid high Ethereum gas fees.
PancakeSwap also offers yield farming, staking, and lottery features — perfect for users who want to earn passive income from their crypto holdings. It’s easy to connect your Trust Wallet or MetaMask and start trading with very low fees.
SushiSwap
SushiSwap started as a fork of Uniswap but has grown into a multi-chain platform supporting Ethereum, BSC, Polygon, and others. Kenyan traders benefit from SushiSwap’s cross-chain swaps, which let you trade assets on different blockchains without moving between multiple platforms.
It also offers liquidity provision and staking opportunities for users seeking additional ways to earn.
1inch Network
1inch is more than just a DEX — it’s a DEX aggregator. This means it searches multiple decentralized exchanges to find you the best price for a trade.
For Kenyan traders, this is helpful when dealing with small budgets because it helps minimize slippage and get better token swap rates.
Curve Finance
If you trade stablecoins frequently, Curve Finance is one of the best DEXs for you. It specializes in low-slippage swaps between stablecoins like USDT, USDC, and DAI.
Kenyan traders who want to move between different stablecoins to avoid market volatility will find Curve especially useful.
Balancer
Balancer is known for its customizable liquidity pools. Unlike other platforms that usually have a 50/50 pool ratio, Balancer lets you create pools with different token weightings, which is perfect for more advanced Kenyan traders looking to optimize their liquidity strategies.
Upsides of Decentralized Exchanges
Before we talk about the downsides, it would be wise to talk a little about the upsides of decentralized exchanges. Despite their risks, DEXs have some great benefits that explain why they are growing in popularity — even here in Kenya.
Full Control of Your Funds
Unlike centralized exchanges, where your crypto is held by the platform, a DEX lets you keep control of your private keys. This means you are the true owner of your funds, reducing the risk of losing them if an exchange is hacked or shut down.
Privacy and No KYC Requirements
Most decentralized exchanges do not require you to submit personal documents or go through KYC verification.
For Kenyan traders who value privacy or want to avoid delays caused by ID verification, this is a huge plus.
Access to a Wide Range of Tokens
DEXs often list new and niche tokens much faster than centralized platforms. This gives Kenyan traders early access to new projects and opportunities that might not yet be available on Binance or other CEXs.
No Centralized Control
Since DEXs are not controlled by a single company or authority, they are less likely to face shutdowns or restrictions. This is especially attractive for Kenyan traders concerned about potential regulatory crackdowns on centralized platforms.
The 5 Major Downsides of Decentralized Exchanges
Before diving into DEX trading, it’s essential to understand the risks. Here are the major downsides of decentralized exchanges that every Kenyan trader should know.
1. Lack of Customer Support
On a DEX, there’s no customer support team to help you recover lost funds, reverse a mistaken transfer, or guide you through a transaction.
For Kenyan beginners, this can be stressful — especially if you’re used to M-Pesa or centralized exchanges that offer quick support channels.
2. Higher Risk of Scams and Rug Pulls
Scams are one of the biggest DEX risks. Anyone can list a token on a decentralized exchange, which means fake tokens and rug pulls are common. If you invest in a fraudulent token, there’s no way to recover your money.
This is a serious concern for crypto trading in Kenya, where many people are looking for quick profits and might fall victim to hype projects or influencer shills.
Related: Best Privacy Practices for Crypto Users in Kenya
3. Complex User Experience
Using a DEX isn’t always beginner-friendly. You’ll need to understand wallet setup, private keys, gas fees, and slippage before you can make a successful trade.
For many Kenyan users who are used to the simplicity of CEX platforms or M-Pesa, this steep learning curve can be discouraging and even costly if mistakes are made.
4. Gas Fees and Network Congestion
Most DEXs run on the Ethereum network, where gas fees can get very expensive during peak trading times. If you’re trading with small amounts — which is common in Kenya — high gas fees can wipe out your profits.
This makes DEX trading less practical for those who want to make frequent, small transactions.
5. Impermanent Loss for Liquidity Providers
Many Kenyans are exploring liquidity pools as a way to earn passive income. But providing liquidity on a DEX exposes you to impermanent loss — a situation where you end up with less value compared to simply holding your tokens.
Understanding this risk is key before locking your funds in a pool.
5. No Fiat On-Ramps
One of the biggest downsides of DEXs for Kenyan traders is that they don’t allow you to buy crypto directly with Kenyan Shillings (KES).
You first have to use a centralized exchange or P2P platform to buy crypto, then transfer it to your wallet, adding extra steps and transaction fees.
I believe the following table will help break down what we have discussed so far:
DEX Vs. CEX – Key Differences
Before we drop into the side-by-side comparison, here’s a short explanation: centralised exchanges (CEXs) and decentralised exchanges (DEXs) aim to accomplish the same goal — let people swap crypto — but they do it with very different trade-offs.
CEXs act like traditional brokers or banks: they custody funds, run order books, and sit between buyers and sellers.
DEXs run on smart contracts and let users trade peer-to-peer from their own wallets. For Kenyan traders, this means choosing between convenience, fiat access, and customer support (CEX), versus custody, privacy, and DeFi composability (DEX).
| Feature | CEX | DEX |
| CUSTODY OF FUNDS | Centralized custody: the exchange holds your private keys and custodial wallets. This simplifies onboarding (you deposit KES via P2P or fiat rails and trade immediately) but means you must trust the platform’s security and policies. If the exchange is hacked or freezes withdrawals, users can lose access. | Non-custodial: you trade from your own wallet and retain private keys. This reduces counterparty risk and makes you the sole custodian, but shifts responsibility—if you lose your keys, funds are irrecoverable. For Kenyan users used to M-Pesa control, the mindset shift can be big. |
| REGULATION & KYC | Generally, there is deeper liquidity on major pairs (BTC, ETH, USDT) because market makers and institutional traders concentrate on CEX order books. This produces tighter spreads for large orders, which is beneficial for Kenyan traders doing bigger trades. | Minimal or no KYC in many DEXs since trades occur on-chain. This offers privacy but can raise regulatory red flags in jurisdictions tightening crypto rules — and limits formal recourse if something goes wrong. |
| LIQUIDITY & MARKET DEPTH | Liquidity depends on pools and protocols; niche tokens may have thin liquidity, leading to larger spreads and slippage. Aggregators help, but large trades can move prices significantly on DEXs. | Often, a clear fee schedule (maker/taker fees, withdrawal fees) is provided. Fees can be competitive, and some platforms offer fee rebates or VIP tiers. Fiat on/off ramps typically have explicit conversion or deposit fees. |
| TRADING FEES & FEE STRUCTURE | Fees are paid as on-chain gas plus protocol fees; the fee structure varies by chain (e.g., BSC is cheaper than Ethereum). Gas spikes make small trades expensive. No account tiers, but fees are more variable and sometimes harder to predict. | Centralised customer service teams, dispute resolution processes, and sometimes reimbursement/compensation policies exist. Means Kenyans have a clearer path when things go wrong (support tickets, KYC verification). |
| ORDER TYPES & ADVANCED TOOLS | Supports limit orders, market orders, stop losses, margin, futures, and advanced charting/algos. Good for active traders who need sophisticated execution. | Most DEXs natively support simple swaps; advanced order types are limited or require third-party services. Some platforms and aggregators now provide limit orders via smart contracts, but UX and reliability lag behind CEX offerings. |
| USER EXPERIENCE & ONBOARDING | Designed for mainstream users: email, password, familiar UIs, customer support, mobile apps, and straightforward fiat purchase flows (including P2P). Easier for Kenyan beginners who want simplicity similar to M-Pesa. | No central customer support—transactions are immutable. Disputes over trades, scams, or lost funds typically have no formal remedy; community governance or protocol teams may help, but there’s no guarantee. |
| CUSTOMER SUPPORT & DISPUTE RESOLUTION | Off-chain order matching and centralized infrastructure enable fast matching and often instant UX for users (trades are reflected in-app quickly). Withdrawals still depend on blockchain confirmation times. | Low privacy: KYC links identity to activity, and exchanges often cooperate with regulators. Useful for compliance, but reduces anonymity. |
| PRIVACY & ANONYMITY | Requires wallet setup (MetaMask, Trust Wallet), understanding of private keys, network selection, and transaction settings. Steeper learning curve — not ideal for absolute beginners without guidance. | High on-chain transparency but low personal data collection; you can trade pseudonymously (wallet addresses), offering privacy for users who value it — though on-chain activity is public and traceable. |
| FIAT ON-RAMPS & OFF-RAMPS | Direct fiat support is common (bank transfers, cards, P2P). This makes it easy for Kenyan traders to buy/sell crypto with KES. CEX ecosystems often integrate with local P2P and payment services. | Permissionless listing: anyone can create a liquidity pool for a token, so new projects appear quickly. Great for early access, but increases exposure to scam tokens and rug pulls. |
| TOKEN AVAILABILITY & LISTING PROCESS | Centralized listing teams control which tokens appear; listings are curated and may include due diligence and compliance checks. This can filter out obvious scams but may limit access to new projects. | Permissionless listing: anyone can create a liquidity pool for a token, so new projects appear quickly. Great for early access, but it increases exposure to scam tokens and rug pulls. |
| SECURITY (HACKS & SAFEGUARDS) | Security depends on the exchange’s practices: cold storage, audits, insurance, and internal controls. Central points of failure (hot wallets, custodial systems) are prime hack targets; some exchanges offer insurance funds for users. | Security depends on smart contract code and the underlying blockchain. DEXs eliminate custodial hacks but introduce smart contract risks (bugs/exploits). Composability increases systemic risk if one protocol is compromised. |
| COUNTERPARTY & CUSTODIAL RISK | Counterparty risk exists because the exchange custodying your assets could fail, become insolvent, or freeze withdrawals. Users depend on the platform’s solvency and governance. | Minimal counterparty risk because you control funds; however, you face smart contract risk and the risk of interacting with malicious contracts or token projects. |
| TRANSACTION SPEED & SCALABILITY | Rarely any centralized insurance; certain protocols offer insurance products, but coverage is limited. If a smart contract is exploited, users usually bear the loss. | Security depends on smart contract code and the underlying blockchain. DEXs eliminate custodial hacks but introduce smart contract risks (bugs/exploits). Composability increases systemic risk if one protocol is compromised. |
| GAS / TRANSACTION COSTS | Users must pay on-chain gas for each trade. On the Ethereum mainnet, this can be prohibitively expensive for small Kenyan trades; choosing cheaper chains mitigates but fragments liquidity. | Fees are predictable and platform-level; users don’t pay gas when trading on off-chain order books (only when withdrawing to the chain). |
| PRICE DISCOVERY & SLIPPAGE | Order books with depth provide classical price discovery and often lower slippage on major pairs. Market makers improve order book stability. | AMM pools use pricing formulas; large trades can suffer significant slippage. Aggregators try to reduce this by splitting trades across pools, but price impact can still be significant. |
| COMPLIANCE & ACCESSIBILITY IN KENYA | Many CEXs implement country-specific restrictions; some will block services if local regulation requires it, but they also can enable KES deposits via partners. This makes them more accessible for Kenyan users wanting fiat conversions. | Many CEXs implement country-specific restrictions; some will block services if local regulation requires it, but they can also enable KES deposits via partners. This makes them more accessible for Kenyan users wanting fiat conversions. |
| DERIVATIVES, MARGIN & LEVERAGE | Robust derivatives markets (futures, options) are common on CEXs, with collateral and margin mechanisms. This attracts advanced Kenyan traders seeking hedging and leverage. | Margin and derivatives exist in DeFi (perpetual protocols), but they are less mature and carry additional smart contract and liquidation risks. Risk models and insurance are still evolving. |
| LIQUIDITY PROVISION & YIELD OPTIONS | CEXs offer staking, savings products, and sometimes yield programs with centralized custody; returns may be lower but perceived as simpler and sometimes insured. | DEXs provide DeFi yield: liquidity pools, yield farming, staking — often higher APYs but with impermanent loss, smart contract risk, and frequently complex mechanics. |
| SMART CONTRACT & PROTOCOL RISK | Risk centers on exchange ops and backend security rather than smart contracts (unless the CEX also runs on-chain products). Audits and insurance can mitigate some risks. | Smart contract bugs, upgradability loopholes, and admin keys are key risks. Even audited contracts can be exploited; composability means one protocol’s failure can ripple across multiple DEXs. |
| INSURANCE & ASSET PROTECTION | Some major CEXs maintain insurance funds or offer custodial protection; users may have partial recourse in certain hack scenarios or regulatory actions. | Rarely any centralized insurance; certain protocols offer insurance products but coverage is limited. If a smart contract is exploited, users usually bear the loss. |
| TRANSPARENCY & AUDITABILITY | Operations are opaque to varying degrees — ledgers are internal and users must trust exchange reports; regulatory filings may add transparency but not full on-chain traceability. | High on-chain transparency: all transactions, liquidity, and smart contract code are public. This enables independent audits and on-chain forensic analysis, even if personal identity remains pseudonymous. |
| GOVERNANCE & UPGRADES | Upgrades and policies are decided by corporate management; users have little direct control but benefit from coordinated, centralized responses to incidents. | Many DEXs are community-governed via tokens and DAOs; governance can be slow, contentious, or captured by large token holders. Protocol upgrades may require votes or admin keys. |
| SETTLEMENT & FINALITY | CEX internal ledger updates are instant; on-chain settlement occurs only when deposits/withdrawals are made. Users see near-instant trade confirmations in the app. | Settlement is on-chain and final once block confirmations are complete. This ensures transparent ownership but can take longer and incur gas costs. |
| SUITABILITY FOR KENYAN USE CASES | Excellent for users who want easy fiat on/off ramps, customer support, and simpler UX — good for beginners, merchants accepting KES, and higher-volume traders. | Excellent for privacy-minded users, DeFi natives, and those seeking tokens unavailable on CEXs. Less ideal for users who need direct KES rails or prefer hands-off custody. |
Tips to Stay Safe When Using DEXs
Even with all these downsides, you can still trade safely on decentralized exchanges if you take the right precautions. Here are practical tips that Kenyan traders should follow.
Verify Tokens Before Trading
Before buying any token on a DEX, always double-check that the token contract address is correct. Use trusted platforms like CoinGecko or CoinMarketCap to find official links and avoid fake lookalike tokens that scammers use to trick buyers.
Start Small and Build Confidence
If you’re new to DEX trading, start with very small amounts. This allows you to learn how wallet setup, slippage, and gas fees work without risking a lot of money. Once you’re comfortable, you can gradually increase your trade sizes.
Double-Check Wallet Addresses
Crypto transactions are irreversible. Always copy and paste wallet addresses carefully, and cross-check the first and last few characters before confirming a transaction. This simple habit can save you from sending funds to the wrong address.
Use Trusted Wallets
Stick to well-established wallets like MetaMask or Trust Wallet, which offer robust security features. If you plan to hold large amounts of crypto, consider investing in a hardware wallet for added protection.
Must read: Best Wallet Reviews for Crypto Traders in Kenya
Understand Gas Fees and Timing
Gas fees can fluctuate depending on network congestion. Learn how to check Ethereum gas fees and try to trade during off-peak hours when fees are lower. This is especially helpful for Kenyan traders making smaller transactions.
Frequently Asked Questions (FAQs)
Q: Are decentralized exchanges safe?
A: They can be safe if you know what you’re doing, but scams and user errors are common.
Q: Can I use M-Pesa to buy crypto on DEXs?
A: No, you’ll need to buy crypto through a centralized exchange or P2P platform first.
Q: What’s the difference between CEX and DEX?
A: A CEX is managed by a company and holds your funds, while a DEX lets you trade peer-to-peer directly from your wallet.
Q: How do I avoid scams on DEXs?
A: Verify token contracts, avoid hype projects, and check for audits before investing.
Conclusion
Decentralized exchanges are powerful tools that give you full control of your crypto, but they also come with serious risks, especially if you’re just starting your crypto trading journey in Kenya.
If you’re planning to use a DEX, take time to educate yourself, use trusted platforms, and never invest more than you can afford to lose.
That’s how you enjoy the benefits of decentralization while protecting your hard-earned money.
Now that I have admonished you on what you need to do, when and how, I still want to know if you have the answer to this question: What are the major downsides of decentralized exchanges? See if you can recite the five major downsides without referring to this blog!