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Cefi and defi - cex and dex -
To understand cefi and defi you needo understand the main motive of both Decentralized Finance (DeFi) platforms and Centralized Finance (CeFi)platform remains the same i.e. to facilitate people to use cryptocurrencies forall of their financial needs and services.
Lets start with cefi, as cefi is pretty simple and also does pretty much the same as defi but with slight differences, and with defi it is a little bit more in depth with what goes on behind it and how the defi world wascreated.
Cefi -
There are many ways in which Centralized Finance (CeFi) differs from Decentralized Finance (DeFi). For example binance and coinbase are two of the worlds most known centralised exchange platforms,
Users typically create an account with these companies and use the platform to primarily transfer and receive funds. But these exchanges not only provide crypto trading services but also support other services like lending, borrowing, margin trading etc. Hence, the morethe number of services a CeFi exchange provides, the more the number of users.Since these are entities that are established and have been there for a while, users trust these platforms while providing intimate and confidential information about themselves. However, since these are centralized in nature,there is always a possibility of data security breach and thefts as these platforms are susceptible to cyber attacks and data leaks. most CeFiservice providers tend to abide by regulations outlined by the local authorities where they operate. These regulations make it mandatory forcentralized financial institutions such as exchanges and trading platforms toimplement Know Your Customer (KYC) and Anti Money Laundering (AML) practices.
One of the many advantages of Centralized Finance(CeFi) over Decentralized Finance (DeFi) is that they support cross chainexchange for multiple cryptocurrencies, although these cryptos are generated onindividual blockchains, thus displaying interoperability of cryptocurrencies.CeFi exchanges also enable the conversion of fiat currency to cryptocurrencyand vice-versa in an easy and seamless manner.
Feautres of cefi -
Centralised Exchanges (CEX Coins)
1. Binance Coin (BNB):
BNB, or Binance Coin, is a cryptocurrency created by Binance.Binance Coin (BNB) powers the Binance Ecosystem. As the native coin of BinanceChain, BNB has multiple use cases: fueling transactions on the Chain, payingfor transaction fees on Binance Exchange, making in-store payments, and manymore.
Where you can use BNB
Pay trading fees – Receive a 25% discount on trading fees usingBNB
Pay travel expenses – Travel the world and pay with BNB at merchantsin Australia
Pay by credit card – Pay your Crypto.com credit card bill with BNB
Stake and shift BNB via VAULT – Stake and shift BNB via Mithril’sVAULT wallet
Buy virtual gifts – Buy virtual gifts on live video streamingplatform
Pay via XPOS – Purchase anything from stores that use the XPOSdevice by Pundi X
Pay in BNB – Pay with BNB on DENT Apps
Pay BNB in the pilot shop – Pay BNB for aircrafts in the pilotshop powered by Aeron
Use BNB to make impact investments – Use BNB to make impactinvestments on Moeda platform globally
BNB Burning Mechanism
Binance plans to destroy BNB each quarter based on the tradingvolume on our exchange, until 50% of the total BNB supply (100 million BNB) isburned. All transactions will be recorded on the blockchain. Eventually, only100 million BNB will remain in circulation.
2. FTX Token (FTT):
FTX is a cryptocurrency derivatives exchange that offers futures,leveraged tokens and OTC trading. FTT is the FTX ecosystem utility token.
3. Crypto.com Coin (CRO):
CRO is the native token of Crypto.com Chain that is intended formobile payments. Crypto.com was founded in 2016 with the goal of accelerating the world’s transition to cryptocurrency. Key products include: the Crypto.comWallet & Card App, a place to buy, sell, and pay with crypto, the MCO VisaCard, a metal card with no annual fees, and the Crypto.com Chain, whichreportedly enables users to pay and be paid in crypto, anywhere, for free.
4. UNUS SED LEO (LEO):
LEO is a cryptocurrency token and operates on the Ethereumplatform. A utility token designed to empower the Bitfinex community and provide utility for those seeking to maximize the output and capabilities ofthe Bitfinex trading platform.
5. Huobi Token (HT):
HT is short for Huobi Token, which is the Huobi Global Ecological Token. HT is a decentralized digital asset based on Ethereum, with a limited total supply of 500 M, issued by Huobi Group.
6. OKB:
OKB is a global utility token issued by OK Blockchain Foundation.OKB is set to connect prospective digital asset projects to OKEx users as wellas professional investors, creating an OKEx ecosystem that helps to advance thedevelopment of blockchain technology and the digital asset industry.
7. KuCoin Token (KCS):
KCS performs as the key to the entire KuCoin ecosystem, and itwill also be the native asset on KuCoin’s decentralized financial services aswell as the governance token of KuCoin Community.
8. Voyager Token (VGX):
The Voyager Token (VGX) rewards users within the Voyager crypto broker ecosystem. VGX generates 5% interest when held in the Voyager app and will soon offer cash back rewards, and other exclusive features. VGX, formerlyEthos (ETHOS), can also be stored in its native wallet, the Ethos Universal Wallet. The Ethos Universal Wallet gives users the power to self custody 150+crypto assets securely.
9. WazirX (WRX):
WazirX (WRX) is a cryptocurrency token and operates on the Binance platform. WRX, a utility token backed by WazirX, forms the backbone of WazirX ecosystem.
10. GateToken (GT):
GateChain is a public blockchain dedicated to asset safety. The onchain safety account and customizable time-delay recovery features were designed to offer blockchain asset safety even after private keys are compromised.
GateToken (GT) is the native currency of GateChain’s ecosystem. Itis used to pay for transaction fees on GateChain’s network and also serves as the PoS staking reward. It is essential to GateChain’s functions.
Defi -
Due to its decentralized structure, DeFi is hands down the best when it comes to protection of personal data. Users are the sole owners of their data, hence there is no chance of funds being stolen or misusedor vulnerable to thefts. Users are responsible for managing their own funds andactivities. As Decentralized Finance (DeFi) is hosted on a Blockchain platformlike etherium, then smart contracts are designed to automatically executetransactions when a particular condition is fulfilled. Since smart contractsare automatic, users can be fully assured that transactions will never fail andwill be properly executed. Users do not require any permission to join aDecentralized Finance (DeFi) exchange since it is permissionless, which is notthe case in Centralized Finance (CeFi) platforms.
But, DeFi exchanges have been lacking inproviding services like cross chain exchanges. Since the process of cross chainexchange is cumbersome and complicated, DeFi platforms fail in providing this interoperability. But with growing technology, Decentralized Finance (DeFi)exchanges have been able to provide alternatives in this regard.
Features of defi -
Decentralised Exchanges (DEX):
1. Uniswap (UNI):
Since its inception, the Uniswap Protocol (“Uniswap”) has servedas a trustless and highly decentralized financial infrastructure. Having proven product-market fit for highly decentralized financial infrastructure with a platform that has thrived independently, Uniswap is now particularly well-positioned for community-led growth, development,and self-sustainability. The introduction of UNI (ERC-20) serves this purpose, enabling shared community ownership and a vibrant, diverse, and dedicated governance system, which willactively guide the protocol towards the future.
2. PancakeSwap (CAKE):
PancakeSwap is a decentralized exchange for swapping BEP20 tokenson Binance Smart Chain. PancakeSwap uses an automated market maker (AMM) model where users trade against a liquidity pool. Such pools are filled with users’funds. They deposit them into the pool, receiving liquidity provider (or LP) tokens in return. They can use those tokens to reclaim their share, plus aportion of the trading fees.
The LP tokens are called FLIP tokens. PancakeSwap also allows users to farm additional tokens – CAKE and SYRUP. On the farm, users candeposit LP tokens, locking them up in a process that rewards users with CAKE.Users can stake CAKE tokens to receive SYRUP, which will have furtherfunctionality as governance tokens (and as tickets in a lotteries).
3. THORChain (RUNE):
THORChain is built for cross-chain permissionless digital assetliquidity. Stake assets in liquidity pools to earn fees, swap assets instantly at open market prices, borrow and lend on any asset, and pay in any currency.THORChain does not compete with any existing protocol or chain. Rather it isbuilt to connect them all in one massively liquid, redundant and decentralisednetwork.
4. SushiSwap (SUSHI):
SushiSwap is an automated market-making (AMM) decentralizedexchange (DEX) currently on the Ethereum blockchain. We are soon expanding our offerings with the BentoBox lending platform.
SushiSwap is a community-run project, governed by the community vote for all major changes to the protocol. Day-to-day operations, rebalancing of pools and ratios, business strategy, and overall development is ultimatelydecided on by our Sushi Chef 0xMaki.
5. Curve DAO Token (CRV):
CRV is a governance token on the Curve platform with time-weightedvoting and value accrual mechanisms.
6. Synthetix Network Token (SNX):
Synthetix, formerly Havven, is a cryptoasset-backed network that enables the creation of on-chain synthetic assets. The Synthetix platformenables the creation of on-chain synthetic assets (Synths) that track the valueof assets in the real world. Some examples of assets that the platform supports are synthetic fiat currencies (sUSD, sAUD, sKRW, etc.), synthetic commodities such as gold (sXAU), as well as more complex assets such as equity indices.
7. Serum (SRM):
Serum claims to be the world’s first completely decentralized derivatives exchange with trustless cross-chain trading brought to you by Project Serum, in collaboration with a consortium of crypto trading and DeFiexperts.
8. Mdex (MDX):
Mdex is an automatic market-making decentralized exchange based onthe concept of fund pools. It is similar in function to some DEXs on the market, but on this basis, it proposes and implements a dual-chain DEX modelbased on the Huobi Eco Chain and Ethereum . It combines the advantages of thelow transaction fees of the Huobi Eco Chain and the prosperity of the Ethereumecosystem, and supports the dual mining mechanism of liquidity andtransactions.
9. Bancor (BNT):
Bancor allows anyone to easily create completely liquid “smarttokens” that calculate their own prices and enable a single party to convertany token to another, without requiring a second party to exchange with.
10. 0x (ZRX):
0x is an open, permissionless protocol allowing for ERC20 tokensto be traded on the Ethereum blockchain.
DeFi vs CeFi
DeFi
CeFi
Funds Custody
The user has complete authority over funds custody.
Outside of user’s custody
Services available
Borrowing, Lending, Payments, Trading
Trading, Borrowing, Fiat-to-crypto, Payments and Lending
Personal Information
Proof of Work
Pluggable Framework
Security
Not accountable for funds.
Vulnerable in case of security bridges on the exchange.
Market Cap
$16 billion*
$324 billion*
Customer Service
NA
Provided by major changes.
Risk Factor
Security relies on the technology you are using.
Centralized exchanges are responsible for security.
Conclusion -
Both Decentralized and Centralized Finance aims to achieve the same goal. They plan to make crypto trading popular and improve the trading volume. However, the way these two ecosystems carry out their objectives is different.
CeFi promises security of funds and fair trade onthose funds. Investors with conventional currency can also take part in cryptotrading. More over, CeFi exchanges provide them with customer support servicesthat DeFi services do not offer. On the other side, DeFi wants to make the space intrusion free. It provides a space for investors to implement their strategies without having to deal with an intermediary body.
Both of these models have their pros and cons. It depends on the investor and their needs. If you prefer transparency and privacy, DeFi is the right model to choose from. On the other hand, if your priority is trust, sharing of risks, flexibility and increased options toinvest, you should opt for CeFi.
