Understanding the DeFi vs CeFi Mechanism
It's easy to fall into maxi thinking in the crypto space. It helps to remember that our true competition is elsewhere.
Why was #bitcoin created in the first place?
Traditional Finance. More particularly, the failure of CENTRALIZED institutions.
This is why there is Decentralized Finance
DeFi Vs CeFi
1) Control/Ownership:
DeFi: You have full control of your funds since you trade directly from your wallet. You don't need to trust a third party.
CeFi: You entrust your assets to an institution, exposing you to custodial risk.
2) Security 🔒
DeFi: Funds are less susceptible to large-scale hacks because they are not stored in a centralized location.
CeFi: Centralized institutions are often targets for cyberattacks, making them more vulnerable to security breaches.
3) Privacy 🥷
DeFi: Users can trade with relative privacy as they don't need to disclose personal information.
CeFi: Centralized institutions typically require Know Your Customer (KYC) verification, compromising user privacy.
4) Accessibility
DeFi: Accessible to anyone with an internet connection and a compatible wallet = financial inclusion.
CeFi: Access may be restricted based on geographical location, regulatory requirements, or social status.
5) Regulatory Compliance
DeFi: Operate with varying degrees of regulation or in jurisdictions with unclear rules, which can be a regulatory risk.
CeFi: Generally comply with established financial regulations, offering a sense of legal security.
