Choise.ai

<p><strong>CeFi Vs <a href="https://beincrypto.com/learn/decentralized-finance-and-use-cases/" rel="noopener noreferrer nofollow">DeFi</a>:  Should they work together? This way, more people will be able to access  the crypto market, driving crypto adoption further, says <a href="https://www.linkedin.com/in/austin-kimm-486b5a22/" rel="noopener noreferrer nofollow">Austin Kimm</a>, Director of Strategy and Investments at <a href="https://choise.com/" rel="noopener noreferrer nofollow">Choise.com</a>.</strong></p><h2 id="header-0">CeFi Vs DeFi: Do they need each other?</h2><p>Decentralized Finance is among the hottest topics in not just crypto  but also finance in general today, widely considered to be the next  frontier for the global economy. Blockchain technology changes the way  we interact with the financial world and it has the power, if  implemented correctly, to break down institutional and bureaucratic  barriers.</p><p>However, looking at things from a practical perspective, <a href="https://beincrypto.com/learn/ethereum-decentralized-finance-revolution/" rel="noopener noreferrer nofollow">DeFi</a> can’t do everything on its own or in isolation from existing financial  infrastructures. For example, it is quite a challenge to successfully  set up a solution that would allow people to buy crypto via a bank card  and use that crypto to interact with the DeFi sector, without passing  through a centralized institution (CeFi). DeFi and CeFi both have their  benefits and drawbacks, and today there is a growing desire to connect  the two worlds for easier access to their respective services.</p><h2 id="header-1">CeFi Vs DeFi: CeFi – Ups and Downs</h2><p>Today, when you buy groceries with a debit card it is drawing the  money from your bank account, held by a centralized institution.  Alternatively in the case of a credit card, you’ll be spending the money  lent to you by the bank or another equivalent institution. On top of  that, the money you use is government fiat currency, printed and backed  by a country’s central bank, meaning that a central institution decides  the <a href="https://beincrypto.com/learn/protect-yourself-from-inflation-using-cryptocurrency/" rel="noopener noreferrer nofollow">inflation</a> rate.</p><p>The examples are endless, but it’s clear to say that most of our  financial interactions pass through the CeFi system. So let’s look at  what CeFi can offer, as well as the drawbacks that it comes with.</p><h2 id="header-2">Advantages:</h2><h3 id="strong-smooth-experience-strong"><strong>Smooth experience</strong></h3><p>When buying something with your traditional debit card, there isn’t a  lot you should worry about. All you have to do is swipe it, and the  amount will automatically be debited to your account. You know that your  funds are safe, and don’t have to worry about them losing 20% of their  value in a day as you would if buying something with <a href="https://beincrypto.com/price/bitcoin/" rel="noopener noreferrer nofollow">Bitcoin</a> or any other cryptocurrency. And if there’s any problem you can always  contact customer service. The same can be said for almost any other  centralized finance service.</p><p>The institution through which you are operating is presumably  reputable and has to follow a set of strict regulations and laws which  are designed to safeguard the <a href="https://beincrypto.com/learn/top10-must-have-cryptocurrency-security-tips/" rel="noopener noreferrer nofollow">security</a> of your funds.</p><h3 id="strong-fiat-to-crypto-support-strong"><strong>Fiat to crypto support</strong></h3><p>Having to buy crypto with fiat or sell it without passing through a  CeFi institution is a headache, to say the least. It’s not impossible,  however, most people wouldn’t even know where to start. Integration  between crypto exchanges and banks or other financial institutions  allows for seamless and easy fiat-to-crypto transactions, and vice  versa.<img src="https://academy-public.coinmarketcap.com/optimized-uploads/44a10e272a3242b89fe1d747ec42e05d.webp" /></p><h2 id="header-3">Disadvantages:</h2><h3 id="strong-no-control-over-your-funds-strong"><strong>No control over your funds</strong></h3><p>Not having control of your funds is among one of the biggest  drawbacks of relying on CeFi institutions. Keeping funds in the bank or a  centralized crypto exchange, for instance, means that an institution  holds your funds, and can, as long as it is compliant with the law, do  as it wishes to them. To safeguard its interest, an institution could  temporarily halt clients from withdrawing their funds. This is a common  sight in times of economic turmoil with both <a href="https://beincrypto.com/learn/top-crypto-companies/" rel="noopener noreferrer nofollow">crypto companies</a> and traditional banking institutions.</p><h3 id="strong-poor-a-href-https-beincrypto-com-learn-crypto-wallets-rel-noopener-noreferrer-nofollow-wallet-a-support-strong"><strong>Poor <a href="https://beincrypto.com/learn/crypto-wallets/" rel="noopener noreferrer nofollow">Wallet</a> support</strong></h3><p>When using CeFi crypto platforms it is likely that the services  offered will only be available for the platform’s coin. Because of this,  if you’re interested in holding different coins, you would likely need  to resort to having multiple different wallets which is, needless to  say, very inconvenient.</p><h2 id="header-4">CeFi Vs DeFi: DeFi – Promises and Risks</h2><p>In contrast with CeFi, DeFi aims to create a financial ecosystem  that, by leveraging the power of the blockchain, provides an alternative  to traditional financial systems and allows users to retain control  over their money. Working peer-to-peer, DeFi cuts out the middleman,  allowing for exchanging of assets with no need for a central authority.  Let’s take a closer look at the pros and cons that this market comes  with.</p><h2 id="header-5">Advantages:</h2><h3 id="strong-say-no-to-the-middleman-strong"><strong>Say no to the middleman</strong></h3><p>Decentralized finance, as the name suggests, allows for a completely  decentralized way of exchanging services on a peer-to-peer basis and  without the need for the oversight or control of third parties and  institutions. Users have full responsibility for holding their funds and  exchanging them as they see fit, with no risk of power abuses like that  mentioned earlier with CeFi. Overall, DeFi excels at empowering  individuals.</p><h3 id="strong-a-rich-ecosystem-strong"><strong>A rich ecosystem</strong></h3><p>DeFi offers a rich ecosystem of products and services, allowing for  endless possibilities that range from trading to yielding deposits to  everything in between. Users can earn significant amounts with these  services, a lot more than would be possible in CeFi.</p><h2 id="header-6">Disadvantages<strong>:</strong></h2><h3 id="strong-not-beginner-friendly-strong"><strong>Not beginner-friendly</strong></h3><p>DeFi takes quite a lot of time to learn and the stakes are usually  high. The concepts of this market can be a lot to swallow even for  experienced members of the crypto industry, let alone newcomers that are  only beginning to find their way around. As a consequence of being lost  and confused, they often act without knowledge and end up losing their  funds. This, in turn, causes some people to turn away from DeFi  altogether to stay on the side of caution, and they end up losing out on  impressive income opportunities.</p><h3 id="strong-risk-of-losing-funds-strong"><strong>Risk of losing funds</strong></h3><p>With more freedom comes more responsibility. DeFi wallets allow you  to store your private keys, and give you a seed phrase to access your  wallet in case the password is lost or device changed. However, storing  the seed phrase is your job, losing it means you unfortunately also lose  your funds. In DeFi there is no central institution to hold your  information for you or help you recover it in the event of loss. It is  all up to you and that can be a cause for doubt and uncertainty for a  lot of people.</p><h3 id="strong-no-interconnectivity-between-blockchains-strong"><strong>No interconnectivity between blockchains</strong></h3><p>The DeFi ecosystem is not yet well-integrated and platforms tend not  to support tokens from different blockchains. Users, therefore, cannot  use all their assets in a unified and straightforward manner, and are  instead forced to swap between different chains to fully benefit from  all that DeFi has to offer. This is a time-consuming process that also  incurs fees.</p><h2 id="header-7">CeFi Vs DeFi: Why not both?</h2><p>Both <a href="https://beincrypto.com/cefi-should-be-regulated-like-traditional-banks-says-defi-boss/" rel="noopener noreferrer nofollow">CeFi</a> and DeFi have their pros and cons, and only by working together can  they reach their full potential. Fully integrating both systems would  allow for all digital assets to be stored in one place, allowing users  to effortlessly utilize various services without ever having to switch  wallets or swap blockchains.<img src="https://academy-public.coinmarketcap.com/optimized-uploads/a7ad4b6be0b442c6ba24d187587cbbbc.webp" /></p><h2 id="header-8">CeFi Vs DeFi: Single entrance point</h2><p>The CeFi system would allow for easy access to all DeFi protocols,  creating a single entrance point. Not having to constantly jump between  protocols and swap coins would greatly simplify the whole process,  lowering fees and making DeFi a lot more accessible, even for beginner  users. By bridging CeFi and DeFi more people will be able to access the  crypto market, driving crypto adoption further, as the industry is made  less daunting by newly developed solutions.</p><p><strong>About the author</strong><img src="https://academy-public.coinmarketcap.com/optimized-uploads/37da78316e8745d988292684a6de003a.webp" /></p><p><a href="https://choisecom.medium.com/" rel="noopener noreferrer nofollow">Austin Kimm</a> is the Director of Strategy and Investments at <a href="https://twitter.com/ChoiseCom" rel="noopener noreferrer nofollow">Choise.com</a>.  Austin has over 25 years of experience as a CEO of international  companies, with a focus on all types of financial services, particularly  insurance and cryptocurrencies. He built several businesses from the  ground up, some of which were sold for more than $500 million.</p><p>Read full article <a href="" rel="noopener noreferrer nofollow">https://beincrypto.com/cefi-vs-defi-which-is-better-should-they-work-together/</a></p><h3 id=""></h3>

CeFi Vs Defi: Which is Better? Should They Work Together?

Table of Contents

ChoiseComCHO

Other articles published on Oct 13, 2022

Bloomberg: Crypterium Becomes Choise.com, the MetaFi Ecosystem Connecting CeFi and DeFi

Cryptonews: Crypterium Becomes Choise.com, the MetaFi Ecosystem Connecting CeFi and DeFi

Cointelegraph: Andrey Diyakonov, chief commercial officer at Choise talks about Solana price ente...

A Letter from our Co-founder Jack Tan: One with WOO

Coincodex: Choise.com Review - A Gateway to Yield & Earn Universe Powered by CHO Token

The big idea of DAOs

Join our free newsletter for daily crypto updates!