DeFi vs. CeFi: What’s the Difference Between Decentralized and Centralized Finance?
The crypto ecosystem is composed of both centralized and decentralized finance, two segments that offer various financial products and services. This guide will compare CeFi vs. DeFi and highlights their respective opportunities and drawbacks. What is Centralized Finance (CeFi)? On the surface, centralized finance (CeFi) is similar to traditional finance (TradFi) since a user deals with trusted intermediaries. However, the two aren’t the same. TradFi consists of legacy institutions that have existed for centuries and are about to venture into the digital asset space, while CeFi refers to digital asset companies that offer crypto-related products and services . Among CeFi platforms, there are centralized crypto exchanges (CEXs), crypto lending companies, and digital currency payment providers. They provide custodial hot wallets to their users. That means the platforms actually hold the private keys of their users’ wallets and are, therefore, in...