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Big chance you have heard the acronyms being thrown around.
CEFI, DEFI, and REFI are acronyms that refer to different types of financial systems or marketplaces within the world of traditional finance and cryptocurrencies.
In this post we will clarify what each of these terms mean, what differences and similarities exist and what popular apps and platforms are out there yet.
More interesting reading material can be found via given urls, given this post’s scope.
Centralized Finance (CeFi)
What is CeFi
The acronym CeFi stands for Centralized Finance.
Centralized finance (CEFI) refers to traditional financial systems that are controlled by central entities, such as banks and other financial institutions.
In a centralized finance system, a single entity or a small group of entities has control over the financial system.
This means that they are responsible for managing and regulating the system, as well as making key decisions that affect it.
Centralized finance systems are typically hierarchical, with a clear chain of command and decision-making authority.
These systems tend to be highly regulated.
Advantages and “Pros”of Centralized Finance
Centralized finance systems are typically well-established and have been around for a long time. They are generally considered to be stable and reliable.
CeFi systems are typically highly regulated, which provide some level of protection for investors.
CeFi systems are can be accessed by a large number of people (but is not widely available)
Centralized finance systems often offer a wide range of financial products and services that are easy to use and accessible.
Disadvantages or “Cons” of Centralized Finance
Lack of innovation
Because they tend to get over regulated and are controlled by a small group of entities, centralized finance systems may be slower to adopt new technologies and innovations.
Lack of privacy
Centralized finance systems often require personal information and may not offer the same level of privacy as decentralized systems.
Vulnerability to fraud
Centralized systems may be more vulnerable to fraud and other forms of abuse, as they are controlled by a single entity or a small group of entities.
Dependence on central authorities
In a centralized finance system, users must rely on central authorities to make key decisions and manage the system, which may not always be in their best interests.
Examples of centralized finance
Think about institutions like banks, credit unions, and other financial service providers that operate within the traditional financial system.
These institutions offer a range of centralized financial products and services, including checking and savings accounts, loans, and investment products.
Trust is needed. This is also the case for centralized crypto solutions like some lenders and borrowers.
How to use CeFi in the space of cryptocurrencies
Earning interest from lending out your crypto or staking it via a 3rd-party is probably the easiest way to make money on your crypto.
But be aware: as this is not trustless you have to have trust in the counter party. We same dramatic results from that with Celcius.
You can earn interest on your cryptocurrencies just like a regular bank account, but then without any negative interest rates.
Popular CeFi apps for crypto
We list some of the more popular CeFi uses, platforms and apps here.
Nexo is the world’s most advanced, regulated digital assets institution offering instant crypto loans, daily earning on assets, exchange, and the only blockchain company to provide its services in 40+ fiat currencies and in more than 200 jurisdictions.
Nexo gives digital asset holders the best of both worlds – instant access to cash and high-yielding interest on idle assets. Also they offer trading and OTC capabilities.