Cryptocurrency is no longer a term that only a few people are familiar with.
Not only are businesses engaged in the crypto market these days,
but so are a big number of actual investors with the popularity of cryptocurrencies. Growing the
conversation has switched to a new set of issues, defi decentralized finance and CFI
central finance. Despite the fact that both defi and CFI provide a wide range of cryptocurrency
related financial services, they are not the same. Hey everyone, welcome to crypto trends
In today's video, we'll talk about the difference between defi and CFI. So make sure to subscribe
to the channel so you don't miss out on any of our videos. So without further ado, let's get into it.
What is defi in the public blockchain space? Defi refers to financial products and services
built on blockchain technologies simply stated D I is a global and open financial system.
You have control and visibility over your money with defi, but you also have access
to global markets and alternatives to your local currency and banking options.
A good internet connection proves to be crucial in this case, another notable characteristic of
decentralized finance is that mark are always accessible with no centralized authorities to
restrict payments or deny you access to anything. The launch of Ethereum paved the way for
organizations and enterprises to design and deploy products that established the defi ecosystem,
allowing them to maximize the potential of defi inside the financial industry with defi
a wealth of potential to create a transparent and secure financial system becomes a reality.
Overall defi provides a variety of services, such as borrowing yield farming, crypto lending,
asset storage, and much more. What is CFI prior to the introduction of defi? The for trading
cryptos was centralized finance. It controls a significant portion of the cryptocurrency market.
All crypto trade orders are processed by a central exchange in centralized finance.
The central exchange is administered by specific individuals who manage the funds.
It means you don't have access to your wallet since you don't have a private key. Furthermore,
the exchange determines which coins are available for trading and how much you must pay in fees
to trade with them to summarize the concept of centralized finance. When you purchase or sell
cryptocurrencies through a centralized exchange, you do not own them. Furthermore, you are bound by
the rules imposed by a centralized strange. Also you are bound by the centralized exchanges rules.
How is defi different from CFI? Despite the fact that defi and CFI have many differences.
The question remains whether customers should trust technology or people, users that utilize
defi have faith in the technology's ability to carry out the services that are being supplied
users of CFI. On the other hand, trust a company's employees to manage finances and provide services,
defi and C I both offer a variety cryptocurrency related financial services.
Let's look at some of the characteristics and functions of both ecosystems that set them apart.
Features of CFI, centralized exchange users submit funds to a standard cryptocurrency
exchange such as bin Kraken or Coinbase. And the exchange manages them in an internal account.
Despite the fact that funds are stored on the exchange, they're kept
outside of users' custody and are vulnerable to threats. If the exchanges security measures fail
as a result, centralized exchanges have been targeted by a variety of security attacks.
Customers on centralized exchanges are comfortable, revealing personal information
and funds in the custody of these organizations because they believe central exchanges are
trustworthy. Furthermore, large exchanges have entire departments with customer support staff
available to assist customers. The excellent quality of customer service
gifts customers, a sense of security reassuring them that their finances
are in good hands. The flexibility of Fiat conversion when converting cash to crypto
and vice versa, centralized services offer more flexibility than decentralized services.
Converting cryptocurrency to Fiat normally requires the use of a centralized institution.
Nevertheless, defi services do not provide as much flexibility with Fiat customer onboarding in the
centralized finance ecosystem is simple and can improve the customer experience.
Cross chain services, trading of light coin X, R P Bitcoins, and other coins issued on separate
blockchain systems is supported through CFI services. Defi services do not support these coins
due to the latency and complexity of completing cross chain exchanges.
CFI can solve this problem by obtaining custody of funds from several blockchains,
many of the most often traded and highest market cap coins exist on separate blockchains and
do not follow interoperability standards. Therefore, this is a huge benefit for DFI
features of defi permissionless to use. Defi users do not need permission to utilize CFI services.
Users must first undergo a KYC process, which requires them to give personal information or
make a financial deposit. Users can use a wallet to access the services without having
to provide personal information or deposit money with defi it's because defi is open
to everyone without any restrictions or discrimination. Individuals who
want to build on top of a decentralized platform can do so without restriction,
it offers a high level of accessibility and encourages community collaboration.
The products developed as part of the defi ecosystem are meant to support one another.
As a result, defi devices are frequently referred to as money Legos trustless. The biggest advantage
of using defi services is that you don't have to trust that they'll work as advertised
users can verify that defi services work is expected by auditing their code and utilizing
external tools like ether scan to see if a transaction was completed appropriately
quick innovation. Another notable benefit of defi is its rapid rate of innovation. The decentralized
finance ecosystem is constantly improving existing capabilities while also experimenting with new
ones. The defi space has grown from a build centric environment to a diverse ecosystem with
groundbreaking financial services. Defi space has been working to give alternate approaches
to handle the issue in functionalities where centralized financial services have developed
to solve defies, inability to support the transfer of incompatible cryptocurrencies
like Bitcoin solutions like TBTC and w BTC, which are compatible with decentralized protocols,
bridge the gap by acting as tokens pegged to the value of BTC.
It allow defi users to utilize defi to access Bitcoin without having to use the token directly
major differences between defi and CFI. One of the most significant differences between decentralized
and centralized finance is that in CFI, the system is regulated. Whereas in defi the opposite is
true in centralized finance, the exchanges are responsible for securing the money of the users.
The concept behind defi on the other hand is that transactions will be successful as
a result of smart contracts. The contract between two parties that enforces certain
rules or terms of negotiation, when a specific circumstance is satisfied to put it another way,
the are in charge of their own finances and activities. It is easy to prevent trading
and place restrictions on users in CFI, in the case of decentralized finance. However,
this is not possible, but there are two things that CFI stands out in first.
It enables easy and seamless conversion of Fiat currency to cryptocurrency and vice.
And second it facilitates cross chain exchange for numerous cryptocurrencies
demonstrating cryptocurrency interoperability. So are there any real use cases? Yeah, there are
some of the real use cases of CFI Coinbase, a cryptocurrency exchange that facilitates trading,
borrowing and trading native stable coin lending payments and more fair. It is a Bitcoin prediction
market, an exchange that runs on the CFI model, blocky, a cryptocurrency and Fiat borrowing and
lending platform Celsius, a cryptocurrency borrowing payments and lending platform,
Latin, an insured Bitcoin to DEI borrowing and lending platform
Libra a global financial infrastructure and cryptocurrency layer. Some of the real use cases
of defi total, an aggregator of decentralized liquidity with automatic price optimization,
auger, a decentralized predictions market nexus mutual, a decentralized insurance tool,
Kyber, a decentralized exchange maker, Dao, a decentralized stable coin,
minting and lending tool, BX, decentralized lending and margin trading platform.
Final thought the goal of both decentralized and centralized finance is the same.
They intend to popularize cryptocurrency trading and increase trading volume. However, the methods
used by these two ecosystems to achieve their goals, differ CFI guarantees, safety of funds, and
the fair trading of such funds. Crypto trading is also available to traditional currency investors.
Furthermore CFI exchanges offer customer support services that defi services do not
defi. On the other hand, aims to keep the space free of intrusion. It gives investors
a place to put their strategy into action out. Having to deal with a middleman, both of these
models have advantages and disadvantages. It is dependent on the investor's requirements. Defi is
the appropriate model to adopt. If you value transparency and privacy. On the other hand,
if you value, trust, risk sharing, flexibility and more investment alternatives, CFI is the way
to go, which is superior defi or CFI. Let us know what you think in the comments area below as it
will help others decide between the two. With that being said, here we come to the end of our video.
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So you never miss any video. See you in the next video till then take care. Thanks for watching.