By now, if you haven't heard about DeFi (decentralized finance), it might be that you've been living under a rock of some kind.
Vastly different in every way, CeFi and DeFi have been divided until recently, with one offering the traditional, bank-enabled financial services we have all grown accustomed to, while DeFi is built on smart contracts, blockchain, and cryptocurrencies.
One system is firmly tied to regulation, has a long-standing history and reputation for security, while the other is an emerging technology that promises users a previously unparalleled opportunity to truly own their assets.
Both present challenges, limitations, and scandals.
So what if we could access the best of both worlds?
Well, that's what CeDeFi is! It's a combination of both centralized and decentralized systems and it has been steadily gaining traction and interest, with some pretty big, recognizable names out there already.
In a nutshell, CeDeFi offers:
1. the same features as DeFi protocols while being centralized
3. the advantages of CeFi systems
As a hybrid of both the centralized and decentralized models, the CeDeFi sector aims to tackle many issues head-on, including those related to security, transaction speeds, and volumes, as well as costs.
In order to understand what benefits it can offer, let's take a look at some players and real-life use cases who have helped to propel CeDeFi forwards.
Binance - leading the way
Binance's CEO Changpeng Zhao coined the term in September 2020 and has continued to be a market leader in the space. Despite some backlash and criticisms for not being "DeFi" enough, it has managed to successfully leverage the best of both worlds, providing a variety of benefits to those building on the BNB Chain.
NEXO - a regulatory-compliant DAO
Featuring products including an exchange, card, borrowing services, and a utility crypto-token, NEXO operates as a DAO. It offers DeFi innovations backed by a regulated ecosystem and is a good use case for a successful CeDeFi company.
Unizen - a pioneer smart exchange
Having partnered with notable players such as AllianceBlock, Unizen provides liquidity-compliant solutions in the DeFi market and has modules that feature in-built products such as the platform’s centralized exchange (CEX), while third-party modules support DeFi integrations. They bring the best of both worlds!
The takeaways
Improved security is definitely one key, alluring factor for CeDeFi offerings - they are more impervious to hacking, as they tend to be built on decentralized structures.
Another beneficial aspect is that they enable lower entry barriers for less experienced people who still wish to explore DeFi, as well as offering more safety measures and presenting options for the risk-averse. Projects and tokens are evaluated and audited by CeDeFi exchanges, making safer and more private transactions possible for consumers.
While purely DeFi solutions are appealing due to their distinctly "ownership, control and anonymity" characteristics, recent scandals in the crypto space have proven that, until clear regulation is in place, a CeDeFi alternative is a safer bet!