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NEOPIN is a leader in the permissioned decentralized finance market. We&#39;re continuing our series of articles explaining DeFi in a very simple way. Today, we&#39;re going to give you a quick overview of what CeFi is and what the problems are.<h2 id="header-0">What is CeFi(Centralized Finance)?</h2><h3 id="strong-6-key-points-strong">[6 key points]</h3>· Centralized Crypto Financial Services· Having a single entity with formal leadership as a &#34;central point of control· Merge familiar financial services and products with blockchain technology· Offer transactions between fiat and cryptocurrencies· Resemble traditional financial applications with a convenient interface (supports usernames, passwords, two-factor authentication, etc.)· Jurisdictions with know-your-customer (KYC), anti-money laundering (AML), and user and investor protection requirements<h3 id="strong-problem-strong">[Problem]</h3>· The firm&#39;s internal practices may be problematic, including misappropriation of client funds, and clients have no control over their funds.· Trading or withdrawal limits may be lowered during market turmoil(BankRun)· Unlike DeFi, transactions made in CEFi are not recorded on the blockchain.· &#34;Not your key, not your crypto&#34; is a famous crypto saying.<h3 id="strong-what-are-some-cefi-risks-strong">[What are some CeFi risks?]</h3>Coinbase warns about the dangers of CeFi in an article called “<a href="https://www.coinbase.com/learn/crypto-basics/what-is-cefi" rel="noopener noreferrer nofollow">What is CeFi</a>?”<img src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXf9W7JIpLpjJDuJWr0MtXUh3dYkHwnc7K17xIQhLydKBAifyBQbeOy4j3Pl0fY8fN3Jab8q3ygx4M1vJK8LCtWdEfqVHmOrsohDcnwzrrM-wgM1dRczHs6j_vTH5Na7LJHPTzEvg8QGxQu44szxVEZC77E?key&#61;SbfHIO2pVA-jNdhOp5muyA" />· Each CeFi product and provider is unique and may put your deposited crypto to work in ways that have higher or lower levels of risk. It’s important to do your homework and understand how your crypto is being used, how the yield you’re earning is generated, and what risks are entailed.· Remember: crypto deposits aren’t currently eligible for the government-backed insurance that protects savings held by a traditional bank.· Some CeFi providers might lock up your principal for a period of time.<h3 id="strong-misappropriation-of-customer-funds-issues-ftx-strong">[Misappropriation of customer funds issues - FTX]</h3>· In November &#39;23, FTX founder <a href="https://www.reuters.com/legal/ftx-founder-sam-bankman-fried-thought-rules-did-not-apply-him-prosecutor-says-2023-11-02/" rel="noopener noreferrer nofollow">Sam Bankman-Fried was convicted of stealing assets from clients</a>.·  This comes a year after FTX filed for bankruptcy following the liquidation of nearly $26 billion in personal assets.·  The Messari &#39;<a href="https://resources.messari.io/pdf/messari-report-crypto-theses-for-2023.pdf" rel="noopener noreferrer nofollow">Crypto Theses for 2023</a>&#39; report, published by FTX and Alameda Research, reveals the most important cryptocurrency investment themes for 2023.collapsed due to depleted liquid assets, FTX mislabeled accounts, and poor management of client funds.mislabeled accounts, and poor client money management.·  As a solution, the report recommends:1) do not commingle client assets;2) recognize losses from bad trades early3) Avoid making high-risk investments using leverage in hopes of making up for losses.4) Maintain strong internal controls and financial management5) Assets should be segregated across different custodians and counterparties across different custodians and counterparties.<h3 id="strong-solution-strong">[Solution]</h3>· Customer misappropriation, bank runs, and more are still an ongoing problem since the dawn of centralized finance· &#39;DeFi&#39; emerges as an alternative to centralized finance&#39;s inherent problems with misappropriation of customer funds· As DeFi also has issues such as security incidents, permissioned DeFi has emerged to compensate for the problems of both CeFi and DeFi.Today, we&#39;ve talked about what CeFi is, what the risks are, and we&#39;ve talked about “permissioned DeFi” as a solution. Next time, we&#39;ll talk about what permissioned DeFi really is. Until next time!&#x1f465; Join the NEOPIN Communities<a href="https://onelink.to/5ynn8k" rel="noopener noreferrer nofollow">App</a> | <a href="https://neopin.io/" rel="noopener noreferrer nofollow">Web</a> | <a href="https://twitter.com/NeopinOfficial" rel="noopener noreferrer nofollow">Twitter</a> | <a href="https://medium.com/neopin-official" rel="noopener noreferrer nofollow">Medium</a> | <a href="https://discord.gg/neopinofficial" rel="noopener noreferrer nofollow">Discord</a> | <a href="https://t.me/neopin_eng" rel="noopener noreferrer nofollow">Telegram</a>

[NEOPIN Easy DeFi] Issues with CeFi

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