MERGING DEFI AND CEFI IN CONNECTION TO ROSEON FINANCE
With the introduction of Bitcoin and Blockchain not long ago, there has been a change in the financial system which is truly revolutionary.
Cryptocurrencies were created with the goal of decentralizing the financial trading system, but initially were used only for trading.
However, Decentralized Finance (DeFi) exchanges emerged not only to facilitate cryptocurrency trading, but also had various use cases such as lending crypto loans, crypto derivative trading such as Bitcoin Futures, tokenizing digital assets, and so on.
Payments, loans, and borrowing were traditionally only available through established financial institutions including banks. However, with the arrival of blockchain technology, everything changed. When the notion of cryptocurrencies started developing, the conversation turned to a new set of considerations, i.e., decentralized finance (DeFi) and centralized finance (CeFi) (CeFi).
A centralized market or finance, CeFi is a financial market system in which all orders are routed through a single central exchange and no other market exists. The quoted prices of the various securities listed on the market are the only price at which investors can purchase or sell the asset.
Decentralized finance (also known as DeFi) is a blockchain-based type of finance that does not rely on central financial intermediaries like brokerages, exchanges, or banks to provide traditional financial instruments, instead relying on smart contracts on blockchains like Ethereum.
DeFi platforms let consumers lend or borrow money from others, trade cryptocurrencies, insure against risks, and earn interest in savings-like accounts. A layered architecture and highly composable building components are used in DeFi.
What distinguishes DeFi from CeFi?
Despite the fact that DeFi and CeFi have numerous distinctions, 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 CeFi, on the other hand, trust a company’s employees to manage finances and provide services.
DeFi and CeFi both offer a variety of cryptocurrency-related financial services. Let’s take a look at some of the characteristics and functions of both ecosystems that set them apart.
Centralization
Exchanges or trading platforms are owned by a single organization, usually a corporation, under a centralized finance environment. They offer a number of services to make cryptocurrency more accessible to its clients. Centralized exchanges, on the other hand, are in charge of everything, including onboarding users and establishing ground rules. DeFi apps, on the other hand, seek to decentralize ownership and turn it over to the community. While the application’s code is run and maintained by the community, everyone has a say in how it should work.
Permission
Users in centralized finance must register and comply with KYC (Know Your Customer) laws. It is frequently used to avoid criminal activities such as money laundering and to comply with crypto rules. You don’t have to submit to KYC or set up an account with DeFi if you have a non-custodial crypto wallet like MetaMask.
Trust
With your assets under centralized finance, you have no choice but to use trust exchanges and other centralized programs. You never have to trust anyone with your assets in DeFi, even if you want to trade them via a peer-to-peer swap.
Roseon Finance as a CeFi-DeFi Bridge
Roseon Finance predicts that DeFi will not entirely replace centralized finance, and that CeFi/DeFi hybrids will be more likely to coexist, with CeFi institutions picking and choosing which DeFi products they like and eventually integrating them into their more user-friendly systems.
Binance, the world’s largest cryptocurrency exchange, announced in September 2020 that its new decentralized Binance Smart Chain (BSC) would be able to access its centralized exchange (CeFi) and that funding would be allocated to support DeFi projects on BSC to encourage collaboration between CeFi and DeFi. This would allow Binance consumers to take advantage of both CeFi and DeFi products, such as futures, margins, and savings.
Roseon Finance aims in the medium to long term future to bridge decentralized finance (DeFi) and centralized swap services (CeFi), also known as “CeDeFi”. Acting as a gateway to DeFi, Roseon Mobile, the multi-chain yield aggregator app that integrates with various centralized and decentralized services.
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