Geometric shapes symbolizing decentralization

Defi vs Cefi vs TradFi

DeFi stands for “Decentralized Finance”, CeFi stands for “Centralized Finance”, TradFi stands for “Traditional Finance”

TradFi is what we are all familiar with: banks. We already get it. Enough said.

CeFi is institutional, in the context of crypto, it would be companies like Coinbase. You link your bank account and exchange traditional money for cryptocurrency.

DeFi is code that runs on a blockchain (like Ethereum) that accomplishes things that institutions used to do, plus all kinds of new possibilities. Some DeFi apps (or dApps) are things like Uniswap (exchange your crypto coins and tokens for others, e.g. convert Eth to Dai).
The goal of the major players and founders of the crypto world is DeFi. DeFi is where the most exciting things happen. Since it’s just code running on the blockchain, it democratizes opportunities. This vision is that anyone can take advantage of any dApp in DeFi and it can’t easily be shut down as it’s on the blockchain, meaning it lives everywhere and nowhere all at once. There is no person or institution to control what you can and cannot do. This empowers people around the world as the code doesn’t discriminate or care about your status. It’s just a set of rules that execute when you initiate a transaction via a crypto wallet connected to a dApp (Uniswap being one such example again).

CeFi is useful, especially now, as DeFi and the crypto world are in their infancy. CeFi is considered a necessary stepping stone to get where we want to be with crypto and will always be around to some extent. However, it would be considered unfortunate and missing the mark by many in the crypto community if CeFi took over the space, as it would just be society beholden to institutions and CEOs and the like, which we already have. The real innovation and benefit to society come from DeFi.

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