By Ayomide Ogunsakin
The essence of Crypto and DeFi is to disrupt TradFi through innovative systems powered by Blockchains.
However, CeDeFi presents a meeting point of both systems, which is intended to groom the innovation of DeFi.
CeDeFi—Centralized Decentralized Finance—as the name implies, is a system that merges aspects of both centralized and decentralized finance, to create a finely blended structure in the crypto world.
We already know that DeFi is the wide range of decentralized financial products, protocols and services powered by blockchain and smart contracts.
CeFi on the other hand, means “centralized finance” and it is an institutionalized structure that enables users trade crypto through controlled exchanges, like Binance, Coinbase and Kucoin.
But unlike DeFi, CeFi frameworks are managed by third parties which follow financial regulations, so users don’t have full privacy and legal ownership of their funds.
CeDeFi creates a hybridized approach of both forms and as such, enables companies to utilize innovations like DEX platforms, liquidity pools, yield farming, lending protocols, 𝑖𝑛𝑡𝑒𝑟 𝑎𝑙𝑖𝑎, without bypassing regulations.
The rise of CeDeFi is largely attributed to Binance, as the term was coined by the term was coined by the platform’s CEO, Changpeng Zhao, during the launch of Binance Smart Chain (BSC) in 2020.
The unique proposition of CeDeFi lies in its provision of an innovative system of DeFi which users can trade crypto assets on a peer-to-peer basis as against centralized exchanges.
There’s also the leverage that it offers companies by allowing them utilize DeFi products at much lower transaction costs.
For instance, using smart contracts and a host of other DeFi services can help lower business risks and speed up transaction processes.
Importantly, CeDeFi also addresses the growing concerns surrounding regulatory compliance in crypto, as the merger paves a path for institutionalized custodianship of DeFi protocols.
In the same vein, it promotes the use of regulated tokens for activities like bond issuance or settlements in DeFi stablecoins, and ultimately holds the potential to revolutionize global payments through DeFi protocols which are faster, easily accessible and more affordable.
Other advantages include that it aids interoperability, flexibility, lowers the learning curve of DeFi for entry level users, and fosters compliance of DeFi platforms to TradFi regulations like KYC—know your customer, and AML—Anti-money Laundering stipulations, which enhances better consumer protection.
Some popular CeDeFi platforms include MakerDAO, Synthetix_io and Compound Finance.
Centralized Decentralized Finance has the potential to help DeFi attain more acceptance, as it brings aspects of crypto into the traditional market.
This would make it safer and easier for users to partake in trading and access well-regulated, high-liquidity Crypto projects.
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