13 Crypto Mistakes People Make When Using Decentralised Exchanges

Decentralised exchanges (DEXs) have transformed how traders interact with cryptocurrency markets, offering autonomy, transparency, and permissionless trading. Yet, with that freedom comes responsibility, and plenty of opportunities for costly missteps. Users entering the DEX ecosystem often underestimate the technical and operational nuances that differ dramatically from traditional centralised platforms.

From slippage confusion to honeypot scams, even experienced traders occasionally stumble into traps that could have been avoided with better preparation. These mistakes can range from minor inconveniences to catastrophic losses, especially when private keys are compromised or fraudulent smart contracts are engaged. The good news? Nearly all of these errors stem from a lack of awareness and can be prevented through diligence and well-informed choice-making.

This guide unpacks 13 common crypto mistakes people make when using decentralised exchanges, explaining how each occurs, why it matters, and, most importantly, what traders can do to avoid them. Whether new to DEXs or refining existing strategies, understanding these pitfalls is essential for trading safely and effectively in the decentralised finance (DeFi) landscape.

1. Not Understanding How Slippage Works

Slippage is one of the most misunderstood aspects of DEX trading. It refers to the difference between the expected price of a trade at the moment of submission and the actual execution price. This discrepancy arises from market volatility, liquidity depth, and network congestion. In fast-moving markets or on low-liquidity pairs, prices can shift dramatically between order placement and confirmation, resulting in traders receiving fewer tokens than anticipated, or paying more than expected.

Many users either don’t know how slippage works or fail to configure slippage tolerance appropriately, leaving themselves vulnerable to failed transactions or unexpected losses. Understanding slippage isn’t just theoretical, it directly impacts trade outcomes and profitability on DEXs.

Setting Slippage Tolerance Too Low or Too High

Slippage tolerance is the maximum percentage deviation from the quoted price that a trader is willing to accept. Setting this parameter correctly is crucial.

• Too low: If slippage tolerance is set at 0.1% or 0.5% on a volatile pair, the transaction is likely to fail repeatedly, wasting gas fees and delaying trades. This is especially problematic during periods of high market activity or when trading tokens with shallow liquidity.
• Too high: Conversely, setting slippage tolerance at 10% or higher opens the door to front-running and sandwich attacks, where malicious bots exploit the generous margin to manipulate pricing. Traders may end up paying significantly more than necessary, eroding profits or amplifying losses.

The sweet spot depends on the token and market conditions. For established, liquid pairs like ETH/USDC, 0.5%–1% is often adequate. For newer or less liquid tokens, 2%–5% may be required. Always adjust slippage based on real-time liquidity and volatility, and avoid blanket settings that don’t account for context.

2. Ignoring Gas Fees Before Transactions

Gas fees, the cost paid to validators for processing transactions on blockchain networks, are a fundamental consideration when using DEXs, especially on Ethereum and other congested networks. During periods of high activity, gas prices can spike dramatically, turning what should be a modest trade into an expensive endeavour. In some cases, gas fees can exceed the value of the trade itself, particularly for smaller transactions.

Ignoring gas fees before submitting transactions is a classic rookie mistake. Traders often rush into trades without checking current network conditions, only to face failed transactions, overpayment, or delayed execution. This oversight not only drains capital but can also disrupt timing-sensitive strategies.

Timing Transactions to Reduce Costs

Smart traders monitor gas prices and execute transactions during periods of lower network activity. Tools like Etherscan’s Gas Tracker, GasNow, or built-in wallet estimators provide real-time data on current and projected gas fees.

• Off-peak hours: Weekends and late-night hours (relative to major markets like the US and Europe) often see reduced congestion and lower fees.
• Layer 2 solutions: Consider using DEXs on Layer 2 networks such as Arbitrum, Optimism, or Polygon, where gas fees are a fraction of mainnet costs.
• Batch transactions: If trading multiple tokens or performing several swaps, consolidate actions to reduce the total number of transactions and cumulative gas costs.

By timing trades strategically and leveraging alternative networks, traders can significantly reduce operational expenses and improve overall profitability on DEXs.

3. Failing to Verify Smart Contract Addresses

One of the most dangerous mistakes on DEXs is interacting with the wrong smart contract address. Unlike centralised exchanges where the platform manages token listings and contract verification, DEXs allow anyone to list tokens, including fraudulent or copycat versions of legitimate projects. Scammers frequently create fake tokens with nearly identical names and symbols, hoping users will trade the wrong contract and lose their funds permanently.

Sending tokens to an incorrect contract address is irreversible. The decentralised, permissionless nature of blockchain means there’s no customer support to reverse a mistake or recover funds.

Best practices to avoid this mistake:

• Always copy contract addresses from official sources: Visit the project’s verified website, official Twitter/X account, or CoinGecko/CoinMarketCap pages where contract addresses are listed.
• Cross-check on block explorers: Use Etherscan, BscScan, or equivalent explorers to verify the contract address, check transaction history, and confirm the token’s legitimacy.
• Beware of phishing: Scammers often create fake websites and social media profiles. Bookmark official sites and double-check URLs before copying addresses.
• Use DEX aggregators cautiously: While platforms like 1inch or Matcha help find the best prices, always verify the token contract before confirming trades.

A few seconds of verification can prevent permanent, costly errors. Never rush this step.

4. Using Unreliable or Unaudited DEXs

The DeFi ecosystem is awash with decentralised exchanges, ranging from battle-tested platforms like Uniswap and SushiSwap to obscure, newly launched protocols with minimal track records. Whilst innovation is welcome, not all DEXs are created equal. Some lack independent security audits, rigorous testing, or transparent governance, making them vulnerable to smart contract bugs, exploits, or outright scams.

Using unreliable or unaudited DEXs exposes traders to significant risks, including loss of funds through hacks, rug pulls, or technical failures. The allure of higher yields or exclusive token listings shouldn’t overshadow the fundamental importance of platform security and credibility.

How to Check for Security Audits

Before committing funds to a DEX, verify its security posture:

• Look for public audit reports: Reputable DEXs publish audit reports from established firms like CertiK, OpenZeppelin, Trail of Bits, or ConsenSys Diligence. These reports should be accessible on the DEX’s website or GitHub.
• Check third-party certifications: Platforms like DeFi Safety and RugDoc provide ratings and risk assessments for DeFi protocols, highlighting audit status, transparency, and operational risks.
• Assess community reputation: Browse forums, Twitter/X, and Reddit for user experiences and red flags. Established DEXs have active, engaged communities and transparent development teams.
• Review smart contract code: If technically inclined, inspect the protocol’s open-source code on GitHub for known vulnerabilities or suspicious logic.
• Prefer established platforms: Especially for larger trades or liquidity provision, stick with well-known DEXs that have withstood the test of time and market stress.

Due diligence here is non-negotiable. The few minutes spent researching can save thousands, or more, in avoidable losses.

5. Neglecting to Revoke Token Approvals

When users interact with a DEX or other decentralised application (dApp), they often grant the smart contract permission to access and spend tokens from their wallet. These token approvals remain active indefinitely unless explicitly revoked. Whilst convenient for repeat transactions, lingering approvals pose a serious security risk: if the dApp is compromised, exploited, or turns malicious, it can drain approved tokens from wallets without further user consent.

Many traders forget about these permissions after completing trades, leaving their wallets exposed. Over time, a single wallet might have dozens of active approvals across multiple protocols, each representing a potential attack vector.

Tools for Managing Wallet Permissions

Fortunately, managing and revoking token approvals is straightforward with the right tools:

• Etherscan Token Approval Checker: Navigate to Etherscan, connect the wallet, and view all active token approvals. Users can revoke permissions directly from the interface (note: revoking requires a small gas fee).
• Revoke.cash: A popular, user-friendly platform that allows users to review and revoke token approvals across multiple blockchains, including Ethereum, Binance Smart Chain, Polygon, and more.
• Unrekt.net: Another approval management tool offering a simple interface for identifying and revoking risky permissions.
• Built-in wallet features: Some wallets, like MetaMask, are beginning to integrate approval management features, though third-party tools are generally more comprehensive.

Best practice: Periodically audit wallet permissions, ideally monthly or after interacting with new dApps, and revoke approvals for protocols no longer in use or with questionable security. This proactive hygiene dramatically reduces exposure to potential exploits.

6. Trading Without Researching Token Liquidity

Token liquidity, the availability of buy and sell orders at various price levels, is a critical factor in DEX trading. Low-liquidity tokens suffer from high slippage, poor price execution, and the risk of being unable to exit positions without significant losses. When liquidity is shallow, even modest-sized trades can move the market price dramatically, resulting in traders receiving far less value than expected.

Many users, especially those new to DEXs, focus solely on token price movements or hype without assessing liquidity depth. This oversight can turn a promising trade into a costly mistake, particularly when trying to sell.

Why liquidity matters:

• Price stability: Liquid pairs maintain tighter bid-ask spreads and more consistent pricing.
• Trade execution: Higher liquidity enables larger trades without excessive slippage.
• Exit strategy: Illiquid tokens can trap holders, making it difficult or impossible to sell without steep discounts.

How to assess liquidity:

• Check DEX analytics: Platforms like DexScreener, DexTools, and DEX-specific analytics pages display liquidity pool sizes, trading volume, and price impact estimates.
• Evaluate liquidity-to-market-cap ratio: A healthy token typically has liquidity representing at least 5%–10% of its market cap.
• Test with small trades: Before committing large amounts, execute a small test trade to observe slippage and price impact.
• Review trading volume: Consistent daily volume indicates active markets and sufficient liquidity.

Avoid trading tokens with liquidity pools under $10,000–$50,000 unless prepared for high slippage and risk. Liquidity research is non-negotiable for prudent DEX trading.

7. Falling for Honeypot and Rug Pull Scams

The decentralised, permissionless nature of DEXs makes them fertile ground for scammers. Two of the most common scams are honeypots and rug pulls, both designed to steal funds from unsuspecting traders.

• Honeypot tokens: These are tokens that users can purchase but cannot sell due to hidden code in the smart contract. Scammers manipulate contract logic to block transfers or impose prohibitively high fees on sales, trapping buyers’ funds permanently.
• Rug pulls: Developers create hype around a token, attract liquidity, then suddenly withdraw all funds from the liquidity pool, leaving holders with worthless tokens. This can happen within hours or days of launch.

Both scams exploit the trust and FOMO (fear of missing out) that often accompany new token launches and aggressive marketing campaigns.

Red Flags to Watch For

Protecting oneself from honeypots and rug pulls requires vigilance and scepticism:

• No audit: Legitimate projects invest in third-party security audits. Absence of audits is a major warning sign.
• Anonymous or unverified teams: Projects with no transparent, doxxed team members or social presence should be treated with extreme caution.
• Aggressive marketing and unrealistic promises: Tokens promising guaranteed returns, “100x gains,” or using heavy promotional tactics often lack substance.
• Locked or missing liquidity: Check if liquidity is locked using services like Unicrypt or Team.Finance. Unlocked liquidity can vanish overnight.
• Excessive token holdings by a single wallet: Use block explorers to verify token distribution. If one or a few wallets hold a disproportionate share, they can dump and crash the price.
• Unable to sell in tests: Before buying significant amounts, test selling a small amount on platforms like Token Sniffer or Honeypot.is to detect honeypot mechanisms.

When in doubt, stay out. The DeFi space rewards caution as much as opportunity.

8. Not Securing Private Keys Properly

Private keys and seed phrases are the lifeblood of cryptocurrency ownership. Unlike centralised exchanges where account recovery is possible, losing private keys on a DEX means permanent, irreversible loss of funds. No customer support, no reset password option, just gone.

Many users underestimate the importance of private key security, storing seed phrases in easily accessible digital formats, sharing them inadvertently, or failing to create secure backups. This mistake can result in catastrophic financial loss, whether through accidental deletion, device failure, phishing attacks, or theft.

Best practices for securing private keys:

• Write seed phrases offline: Use pen and paper, and store physical copies in multiple secure locations (e.g., safe, safety deposit box). Never store seed phrases digitally on cloud services, email, or note-taking apps.
• Use hardware wallets: Devices like Ledger or Trezor keep private keys offline and protected, significantly reducing exposure to malware and phishing.
• Enable strong passwords and 2FA: For wallets and devices accessing crypto, use complex, unique passwords and activate two-factor authentication where supported.
• Beware of phishing: Never enter seed phrases or private keys into websites, emails, or pop-ups. Legitimate services never request this information.
• Create redundant backups: Store multiple copies of seed phrases in geographically separate locations to protect against fire, theft, or natural disasters.
• Consider metal backups: For long-term storage, engrave seed phrases onto metal plates resistant to fire and water damage.

Private key security isn’t optional, it’s fundamental. One moment of carelessness can undo years of disciplined investing.

9. Overlooking Impermanent Loss in Liquidity Pools

Providing liquidity to DEX pools can generate attractive yields through trading fees and token rewards. But, many users jump into liquidity provision without understanding impermanent loss, a phenomenon where the value of deposited assets diverges from simply holding them due to price volatility.

Impermanent loss occurs because liquidity pools rebalance asset ratios as prices shift. If one token in a pair appreciates significantly relative to the other, liquidity providers end up with more of the depreciated token and less of the appreciated one compared to holding both separately. When volatility is high, impermanent loss can exceed fee earnings, resulting in net losses.

This risk is particularly pronounced in pairs with uncorrelated or highly volatile assets (e.g., ETH/SHIB). Stablecoin pairs (e.g., USDC/DAI) experience minimal impermanent loss due to price stability.

When Providing Liquidity Makes Sense

Even though the risks, liquidity provision can be profitable under the right conditions:

• Stable or correlated pairs: Providing liquidity to stablecoin pairs or assets that move in tandem (e.g., ETH/stETH) minimises impermanent loss.
• High-volume pools with strong fee generation: Pools with significant trading activity generate fees that can offset impermanent loss, especially over longer timeframes.
• Long-term commitment: Short-term liquidity provision is more vulnerable to impermanent loss. Long holding periods allow fee accumulation to compensate for price divergence.
• Incentivised pools: Pools offering additional token rewards (liquidity mining) can provide extra yield to counterbalance impermanent loss.

Before providing liquidity:

• Use impermanent loss calculators (e.g., DailyDefi.org, CoinGecko) to model potential outcomes.
• Understand the token pair’s volatility and correlation.
• Compare expected fees and rewards against impermanent loss risk.

Liquidity provision isn’t passive income, it’s an active strategy requiring careful analysis and ongoing monitoring.

10. Making Trades During High Volatility Without Stop-Losses

Cryptocurrency markets are notoriously volatile, with prices capable of swinging 10%–20% or more within minutes. Trading during these periods without protective mechanisms like stop-losses amplifies risk and can lead to devastating losses, especially when leverage or large positions are involved.

Unlike centralised exchanges, most DEXs lack native stop-loss functionality, placing greater responsibility on traders to manage risk manually or through third-party tools. Many traders, caught up in the excitement or fear of volatile markets, enter positions impulsively without exit strategies, hoping to time the market perfectly, a recipe for disaster.

Risks of trading without stop-losses:

• Rapid drawdowns: Prices can plummet faster than traders can react, especially during flash crashes or market-wide sell-offs.
• Emotional decision-making: Without predefined exit points, traders are prone to panic selling at the worst possible moments or holding losing positions too long.
• Overexposure: High volatility can quickly turn manageable positions into ruinous losses.

Strategies to mitigate risk:

• Use DeFi protocols with stop-loss features: Platforms like Gelato Network, dHEDGE, or DEX aggregators with conditional order capabilities enable automated stop-losses.
• Set mental stop-losses and stick to them: If technical stop-losses aren’t feasible, predetermine exit points and execute manually when triggered, discipline is key.
• Reduce position size during volatility: Trading smaller amounts limits exposure and potential losses.
• Monitor positions actively: During high volatility, passive monitoring isn’t enough. Stay engaged and ready to act.
• Avoid FOMO trades: Volatility often sparks impulsive decisions. Stick to a trading plan and avoid chasing pumps or panic-selling dips.

Trading without stop-losses in volatile conditions is akin to driving without seatbelts, it might be fine until it isn’t. Risk management is the cornerstone of sustainable trading success.

11. Connecting Wallets to Suspicious dApps

Connecting a wallet to a decentralised application grants the dApp varying levels of access to wallet contents and transaction capabilities. Whilst most legitimate dApps operate transparently and securely, malicious or compromised dApps can exploit wallet connections to steal funds, harvest data, or execute unauthorised transactions.

Many users connect wallets indiscriminately, especially when chasing new opportunities, airdrops, or yield farms. This carelessness can result in drained wallets, stolen NFTs, or exposed private data, all without the user’s explicit knowledge.

Safe Wallet Connection Practices

Protecting wallets from suspicious dApps requires caution and proactive security measures:

• Only connect to reputable, verified dApps: Stick to well-known platforms with established reputations, transparent teams, and active communities. Verify URLs carefully to avoid phishing sites.
• Research before connecting: Check for security audits, user reviews, and any history of exploits or scams. Platforms like DeFi Safety and RugDoc provide risk assessments.
• Use separate wallets for different activities: Maintain a “hot” wallet with smaller amounts for interacting with new or experimental dApps, and a “cold” wallet or hardware wallet for long-term holdings.
• Review connection permissions: Before connecting, review what data and permissions the dApp requests. Be wary of excessive or unnecessary access.
• Disconnect when not in use: After completing transactions, disconnect wallets from dApps to limit ongoing exposure. Many wallets allow easy disconnection through settings.
• Enable wallet security features: Use hardware wallets, require transaction confirmations, and activate security alerts where available.
• Beware of pop-ups and unsolicited prompts: Scammers often use fake pop-ups mimicking legitimate wallet connection requests. Always initiate connections manually from official sites.

Treating wallet connections with the same caution as handing over banking details is essential in the decentralised world. When in doubt, skip it.

12. Not Keeping Records for Tax Purposes

Cryptocurrency transactions, including those on DEXs, are taxable events in most jurisdictions. Every trade, swap, liquidity provision, and withdrawal can trigger capital gains, income, or other tax liabilities. Failing to maintain accurate records makes tax filing a nightmare and can result in penalties, audits, or overpayment due to incorrect calculations.

Many DEX users assume decentralisation equals invisibility to tax authorities, a dangerous misconception. Governments are increasingly scrutinising crypto activity, and blockchain transactions are permanently recorded and traceable. Without proper documentation, users may face compliance issues or miss opportunities to claim losses and deductions.

What to record:

• Transaction details: Date, time, token amounts, contract addresses, and transaction hashes.
• Prices at transaction time: Fair market value of tokens in fiat currency at the moment of each trade.
• Fees and gas costs: These can be deductible in many jurisdictions.
• Wallet addresses and labels: Clearly document which wallets are used for what purposes.

Tools to simplify crypto tax tracking:

• Koinly: Integrates with multiple blockchains and DEXs, automatically importing transactions and calculating tax liabilities.
• CoinTracker: Offers portfolio tracking and tax reporting with support for hundreds of exchanges and wallets.
• Accointing: Provides real-time portfolio analytics and tax report generation.
• TokenTax: Specialises in DeFi and DEX transactions, handling complex scenarios like liquidity pools and yield farming.
• Manual spreadsheets: For those preferring control, maintaining a detailed Excel or Google Sheets log works, though it’s more labour-intensive.

Best practices:

• Start tracking from the first transaction, retroactive reconstruction is tedious and error-prone.
• Regularly export transaction data from wallets and DEXs.
• Consult with a crypto-savvy accountant or tax professional, especially for complex DeFi activities.

Proper record-keeping isn’t just about compliance, it’s about financial clarity and peace of mind. Don’t wait until tax season to get organised.

13. Rushing Transactions Without Double-Checking Details

In the fast-paced world of DEX trading, it’s tempting to rush through transactions, especially when chasing price movements or reacting to market volatility. But, haste is one of the most common causes of costly errors. A single misplaced character in a wallet address, selecting the wrong token, or confirming an incorrect slippage setting can result in permanent loss of funds, failed trades, or significant overpayment.

Unlike centralised exchanges where some mistakes can be reversed or where customer support may intervene, DEX transactions are final and irreversible once confirmed on the blockchain. There’s no “undo” button, no refund process, and no safety net.

Common mistakes caused by rushing:

• Incorrect wallet addresses: Sending tokens to the wrong address, often due to copy-paste errors or phishing clipboard malware.
• Wrong token selection: Choosing a similarly named or fake token instead of the intended one.
• Misconfigured slippage or gas fees: Setting parameters too high or too low without considering market conditions.
• Skipping contract verification: Trading with unverified or malicious smart contracts.
• Ignoring transaction previews: Failing to review the estimated output, fees, and final details before confirming.

Best practices to avoid rushing mistakes:

• Slow down: Take a few extra seconds to review every detail before confirming. This small investment of time can prevent enormous losses.
• Double-check wallet addresses: Verify at least the first and last characters of addresses. Consider sending a small test transaction first for large transfers.
• Confirm token contracts: Cross-reference token symbols and contract addresses with official sources.
• Review transaction previews: Carefully inspect the estimated token amounts, fees, and route before clicking “confirm.”
• Use address book features: Save frequently used addresses in wallet address books to reduce manual entry errors.
• Pause during high-stress moments: If feeling rushed or anxious, step back and reassess before proceeding.

Speed is less important than accuracy in DEX trading. A few moments of careful review can be the difference between a successful trade and an irreversible disaster.

Conclusion

Decentralised exchanges offer unparalleled freedom and control, but they also place full responsibility on users to navigate risks, verify details, and manage security. The 13 mistakes outlined in this guide, from misunderstanding slippage and ignoring gas fees to falling for scams and rushing transactions, are all avoidable with vigilance, research, and disciplined operational practices.

Success on DEXs isn’t just about identifying profitable trades: it’s about cultivating a mindset of caution, continuous learning, and proactive risk management. Each mistake represents a lesson learned by others, lessons that readers can now sidestep by applying the strategies and best practices covered here.

Take the time to verify smart contract addresses, audit wallet permissions, research token liquidity, and secure private keys. Use the right tools for managing gas fees, tracking taxes, and detecting scams. And above all, slow down and double-check every transaction before confirming.

Trading on decentralised exchanges can be rewarding, but only when approached with the respect and care the ecosystem demands. By avoiding these common crypto mistakes, traders can protect their capital, enhance their strategies, and navigate the DeFi landscape with confidence and security.

Frequently Asked Questions

What are the most common crypto mistakes when using decentralised exchanges?

Common mistakes include misunderstanding slippage settings, ignoring gas fees, failing to verify smart contract addresses, neglecting to revoke token approvals, trading low-liquidity tokens, and rushing transactions without double-checking details. Each can lead to failed trades or permanent fund loss.

How can I avoid honeypot scams on DEXs?

Check for security audits, verify the development team’s transparency, test selling small amounts before large purchases, and review token distribution on block explorers. Use tools like Honeypot.is or Token Sniffer to detect malicious smart contracts before trading.

What is slippage tolerance and how should I set it?

Slippage tolerance is the maximum price deviation you’ll accept during a trade. For liquid pairs like ETH/USDC, set 0.5%–1%. For newer tokens with lower liquidity, 2%–5% may be necessary. Setting it too low causes failed transactions; too high invites front-running attacks.

Do I need to pay taxes on decentralised exchange transactions?

Yes, DEX transactions are taxable events in most jurisdictions. Every swap, trade, and liquidity provision can trigger capital gains or income tax. Use tools like Koinly or CoinTracker to maintain accurate records, including transaction dates, amounts, and fair market values.

How do I protect my wallet from malicious dApps?

Only connect to verified, reputable dApps with security audits. Use separate wallets for experimental platforms versus long-term holdings. Regularly revoke token approvals using tools like Revoke.cash or Etherscan’s Token Approval Checker to minimise exposure to potential exploits.

What is the difference between a centralised and decentralised crypto exchange?

Centralised exchanges (CEXs) are custodial platforms managed by companies that hold user funds and provide customer support. Decentralised exchanges (DEXs) are non-custodial, permissionless protocols where users maintain full control of their private keys and trade directly from their wallets without intermediaries.