DeFi and CeFi: they are just different

After the correct observation by a friend of mine, I take this opportunity to highlight the differences between the two types of this new finance, that is full digital. 

Although they both have the same goal, it is the means by which they pursue it that are diametrically opposed.

As we know, Binance gives the possibility of staking, through its platform, and following the latest updates and evolutions, it has also added the possibility of lending to its portfolio of financial products.

And here it immediately catches our attention that being everything subordinated to the Binance platform, we cannot talk about DeFi (decentralized finance) but CeFI (centralized finance); in a sense it is as if a bank were offering financial products with cryptocurrencies as the underlying asset.

CeFi - DeFi the main difference

The transposition of financial products on the blockchain is affecting a very fervent application field. Starting from lending protocols, passing through security tokens, reaching NFTs (non fungible tokens) are the categories of a very active sector.

But when can we talk about DeFi?

We speak of decentralized finance when there is no intermediary for the use of the financial product and everything is supported on decentralized networks, open source software, transparent and trustless protocols.

In DeFi, the user itself get access to the requested financial service and it is then resistant to censorship (no entity can prevent him from accessing it); it also has full power over its assets and personal data.

To have access to DeFi, all you need is a Smartphone and an internet connection.

If no one is checking, who should check?

Simple: a smart contract.

As mentioned above, DeFi is based on open source software so it is free and open to all: the code that regulates the smart-contract can be verified by anyone; consequently the logics are transparent.

On the contrary, CeFi is based on financial products, which always have cryptocurrency as their object, managed centrally by a company.

Here is the explanation of the Binance phenomenon: from a simple broker for trading, it has slowly added various financial products to almost become a real "Crypto Bank" and not Crypto-Friedly!

It is for this reason that I have published videos on how to stake directly from the source without going through any platform: it is about maintaining a certain line of decentralization to which we have been introduced since the birth of cryptocurrencies.

Who wins the competition? DeFi or CeFi?

The answer is extremely personal, as each of the two solutions brings with it positive and negative sides.

With DeFi, we personally manage everything from the signing of the smart-contract to the communication of personal data; what's more, our cryptocurrencies never leave our wallet.

On the other side (Take it on the Other side, nanananana. Thank RHCP for this amazing memory), however, the management of the smart-contract does not admit any kind of ignorance: whoever executes it must know how, when, where, why, who, is happening.

CeFi, on the other hand, does not require this precise knowledge of things: within the platform the user is guided step by step in the realization of what is desired.

However, it is necessary to know that with a platform that offers these services, it is necessary to fill in a KYC and in some cases, depending on the movements, even an AML.

In addition to all this, our cryptocurrencies can no longer be in our wallet, but in the account we have created within the platform.

With all the hacking risks that can exist.

The choice is still very subjective: those who, for fear of making a mistake or out of laziness, do not stop to try to understand the smart-contract and rely on a platform, therefore a CeFi.

While those more enterprising and devoted to decentralization and the holding of power of their money prefer to rely on a DeFi.

Your Move!