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With DeFi, you not only have control and visibility over your money but also have exposure to global alternatives to your local currency or banking options. In simple terms, DeFi is an open and global financial system that offers transparency and accessibility to global markets. In the public blockchain space, decentralized finance, more commonly referred to as DeFi, is a catch-all term for financial products and services built on blockchain technology. You are also subject to the rules set by the exchange, which can change at any time without notice. When using CeFi, you don’t own your cryptocurrencies outright –– they are instead held by the exchange. This was the most popular method of trading cryptos prior to DeFi’s invention, and it had a firm grip on the cryptocurrency market.įunds are managed by a central exchange, which then decides which coins are traded and what fees need to be paid. CeFi typically relies on fiat currency, which is money that is not backed by any physical commodity. This central authority can be a government, a bank or another financial institution.
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With CeFi, a central authority controls the financial system and involves all crypto trade orders being handled through a central exchange. What are the Differences Between DeFi and CeFi?Ĭentralized finance, CeFi, is the traditional form of finance and is how most people are used to dealing with money.