DeFi vs CeFi — What does the future hold?
Almost all crypto enthusiasts are all about DeFi, the potentials it has and many say it is one of the biggest things right now. Is it really worth the hype?
DeFi anytime it’s mentioned is talked about in relative to CeFi, showing that there is an existing protocol and one is just coming to the picture.
So what really is CeFi and why is DeFi rated over it?
CeFi simply means Centralized Finance, it is set up in such a way that all transactions and orders goes through a singular central exchange. This means there is a body calling the shots, they are entrusted to keep the balance.
DeFi on the other hand means Decentralized Finance, it refers to the economic paradigm shift enabled by mostly blockchain networks. It's aim is to make dealings and transactions open, more of why it is often called open finance.
A good example is OKEx.
It is to be noted that both actually perform the same basic functions but DeFi is more open and have a wider range of use cases, and it is more trusted.
The fact that DeFi is automated and faster to use than CeFi is one of the reason for the hype. Developers, individuals, and institutions all have benefited from the numerous use cases of DeFi.
DeFi is all about increasing financial security and transparency growth opportunities and so on. CeFi is said to do these also but the trust for it has waned over the years.
We can say DeFi is purely digital, you own your keys and in total control your funds. This is good news and also bad news.
Good news in the sense that no central authority can siphon, trade or touch your funds. And bad news because once your keys are gone, that's the end of your funds. It can't be retrieved.
This is the part where CeFi still stay winning, good and bad news too. Good news in the sense that you can always get access to your funds if you lose your password, as long as you have completed your KYC. Bad news because your funds is not really yours but under the central authorities, you're at their mercies.
The two are still going to be here for a long time, but DeFi has the upper hand here with it's many use cases. I'll pitch my tent with DeFi anytime any day, although sometimes there should be a central authority.
CeFi will need to infuse many of DeFi's protocols as many are adopting the blockchain, their coexistence is something worth studying and observing keenly.
Keep an eye on OKEx, it’s solid project. You’ll be glad you did.
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