Uniswap Labs Raises $165M In Series B
2022-10-14
France Approves Société Générale to Operate Digital Asset Services
2022-10-17

All You Need To Know About DeFi and CeFi

The average crypto user today usually does not know the systems that control their daily trading activities in the crypto market. We simply click to buy and sell crypto when we want to own or sell it, and it happens.

DeFi and CeFi are the two very interesting technologies that control the crypto technology and market’s daily activities. You can see centralized finance (CeFi) as a financial system like your bank that holds, manages and protects your fund on your behalf.

Decentralized finance (DeFi) offers a new finance system that gives you more control over your financial activities. 

In this article, you will understand the meaning of DeFi and CeFi, the differences, and how they can benefit you.

What is CeFi (Centralized Finance)

Even before the invention of cryptocurrencies, centralised finance has always existed, from central banks to government bonds. CeFi is an abbreviation that simply means “centralized finance.”

In crypto, CeFi usually refers to crypto exchanges. In CeFi, crypto transactions must pass through a centralized exchange. In centralized finance, users expect their trades to be executed by the crypto exchange on their behalf. 

While users cannot control a CeFi platform, they can choose what to buy and sell. It is centralised in that the platform makes rules that users must follow. Regulations include operation time and documents to submit to do your KYC correctly before you are allowed to use some features.

Examples of the best crypto platforms that best CeFi includes BingX and other popular exchanges. 

These centralized exchanges offer many other crypto-related services except crypto trading, such as lending and margin trading. 

While users can access their funds anytime, there may be risks if the exchange’s security is compromised. You must choose a trusted exchange like BingX with valuable track records.

What is DeFi (Decentralized Finance)

DeFi simply means decentralized finance and is the opposite of CeFi. It was the introduction of blockchain technology that gave birth to decentralized finance.

A significant feature that makes DeFi unique is its focus on giving users more control. 

With DeFi, there is no customer care to respond when you make an error. Decentralized finance is made possible by smart computer contracts that replace processes that control financial transactions.

In crypto DeFi platforms, users have the absolute choice of storing their assets, sending and receiving more assets, and destroying them. 

Some examples operating as DeFi platforms are Aave, Uniswap, Yearn Finance, and many others. 

Major Differences Between DeFi and CeFi 

You must consider certain factors in the debate of which is better between DeFi and CeFi, and they include;

Custody 

Custody is a major difference between DeFi and CeFi, as how you can control your assets in both differs.

While discussing CeFi, you can see that centralized platforms control your assets while ensuring safety. 

In the case of DeFi, every risk that comes with your money is in your hands.

Generally, CeFi is very popular among crypto users as they prefer crypto exchanges to help keep custody of their assets. 

Transaction Fees 

Regarding DeFi vs CeFi, gas fees are another difference as one makes it mandatory to pay fees while the other sometimes offers free transactions. 

For CeFi, users sometimes make transactions without having to pay transaction fees. While for DeFi, the transaction fee is reasonably necessary to avoid spam and scam on the platform. 

Market Hours 

Being a centralized exchange means that institutions or an organisation control market activities. Most of the time, CeFi platforms have a closing time. 

In DeFi, platforms are open 24 hours a day. BingX allows trade on its platform 24 hours daily. 

Public Verifiability 

Most of the time, the DeFi application code is open source. This means that the public can easily verify if a transaction took place or not. For CeFi, there is often little or no transparency within centralized exchanges, sometimes for the privacy of the users . 

Public verifiability is one of the things that gives decentralized finance an edge in the DeFi vs CeFi debate. 

Anonymity

For centralized finance, the identity of those behind a project is often known more than that of decentralized finance. 

Using Bitcoin as an example, even the creators of the pioneer cryptocurrency are still unknown even though Bitcoin is still in existence. In a CeFi, you need to do your KYC.

Trading of Crypto Assets 

While discussing CeFi’s meaning, we mentioned its principle is based on the traditional financial system where the platform offers you what to trade. 

For DeFi platforms, they make use of automated market makers (AMM) while trading crypto assets and can trade any asset including risky ones that centralized exchanges won’t approve. 

Compliance 

Instead of using Know Your Customer (KYC) guidelines for compliance like in centralized exchanges, DeFi uses Know Your Transaction (KYT) guidelines.

Benefits and Use Cases of DeFi and CeFi 

While DeFi and CeFi may not be very similar, they contribute a lot to the crypto industry. They serve as mediums for cryptocurrency trading, high liquidity, crypto forecasts, and asset management.

BingX is one of the top 10 crypto exchanges in the world that offers the best of both worlds for its users. From spot trading, futures, automated bot trading, copy trading, and zero-fee trading, let’s take a quick look at all the factors that make BingX special.

BingX Copy Trading

With over 3 million successful copy traders on the BingX platform, it is evident why many are staying behind. 

Whether you are a newbie or an advanced trader, BingX has a copy trading feature that allows you to trade beyond your level of expertise while empowering proficient traders to earn extra income by helping copiers.

BingX Copy Trading Subsidy Vouchers

BingX became the first crypto exchange in the world to offer copy trading subsidy vouchers . These help you to cover losses while trading. 

Assuming you have one free copy trade voucher you want to use to make a trade. Any loss you incur while making that trade will not affect your money. However, if it is successful, you can keep the entire profit.

BingX Zero Fees On Spot Trading

BingX continues to lead its competitors in the global crypto trading market by eliminating trading fees for its traders on the spot market.

BingX Social Trading platform

As the industry’s leading social trading exchange, BingX provides a robust environment where copiers and traders can gather, communicate, and profit.

BingX Bot Trading

BingX Grid Trading or Automated Trading Bot allows you to trade even when asleep and still catch profits 24/7. 

You simply have to set up trades based on some conditions, which will help you initiate them and keep profit even if you are unavailable.

Way Forward

Despite the difference, decentralized and centralized finance is needed in the crypto ecosystem for many things to work. BingX brings the benefits of both worlds to you, from decentralized social interactions, daily open markets for trading and security of your funds on its centralized exchange.

While CeFi has more liquidity, DeFi is often used in data analysis and the gaming industry due to its transparency. 

Either way, both are important as they have unique properties. At BingX, we offer you incredible trading experiences that make your crypto trading journey easier and more profitable.

Start Trading With BingX Today