DeFi vs CeFi Cryptocurrency: What Are The Differences?

Bitcoin prompted the emergence of an entire industry around blockchain technology and digital currencies. Some cryptocurrency market participants argue that decentralized solutions would gradually replace traditional financial services. While it’s too early to make such claims confidently, we can agree that an exciting competition and interaction between decentralized finance (DeFi) and centralized finance (CeFi) is taking place precisely within the cryptocurrency industry. In the present article, we’ll discuss the main contrasts between the two trends.

The main difference between DeFi and CeFi is that the former involves decentralized infrastructures, where the financial services are governed by communities rather than single entities. In CeFi, all operations are managed by a business or a consortium of companies and organizations. Consequently, the mechanisms differ as well.  

What Is DeFi in Crypto? 

Before understanding the differences between DeFi vs CeFi, we’ll start by defining each approach separately. While CeFi came first to address the Bitcoin adoption, DeFi is the buzzword this year, and we’ll start with it.