<p>The limitations of the conventional financial system and centralized cryptocurrency exchanges are overcome by decentralized finance (DeFi). Nevertheless, despite its novelty, it still cannot be widely adopted because it lacks a lot of the advantages of centralized finance. <strong>CeDeFi</strong>, or centralized decentralized finance, aims to address this issue by fusing cutting-edge blockchain technology with institutional-grade custodianship.</p><p dir="ltr">The <strong>CeDeFi</strong> idea is a little difficult to grasp. DeFi's fundamental ideas may appear to be in opposition to centralized authority, but these models can work well together. We'll explain how <strong>CeDeFi platforms</strong> operate and why centralization is a major trend in the cryptocurrency market to help you make sense of everything.</p><h2>The characters of DeFi and CeFi</h2><p dir="ltr">DeFi is a collection of blockchain-based technologies that use secure distributed ledgers to enable peer-to-peer (P2P) crypto transactions. Users can trade cryptocurrencies and digital assets without the use of third-party intermediaries because they have been replaced by self-executing techniques known as smart contracts. DeFi essentially replaces the conventional finance model with a borderless and modular system that does not require an intermediary.</p><p dir="ltr">DeFi is still a long way from becoming widely used. Three major reasons stand out:</p><ul><li><p dir="ltr"><strong>Non-compliant network:</strong> DeFi apps are appealing to larger enterprises because they lack custodial services, regulation protection, sufficient audit, and institutional-grade transaction analysis.</p></li><li><p dir="ltr"><strong>Vulnerabilities:</strong> The lack of regulations makes the ecosystem more vulnerable to errors and hacks. According to Elliptic's report, DeFi exploits will exceed $12 billion in 2021 (with theft and fraud accounting for $10.5 billion of that total).</p></li><li><p dir="ltr"><strong>Insufficient liquidity pool:</strong>&nbsp; Even the most well-known decentralized exchange, Uniswap, handled slightly more than $1 billion in daily volume in 2022. When compared to the trading volumes of CEX like Binance ($21 billion) or the NASDAQ stock exchange (up to $400 billion), this is significant.</p></li></ul><p dir="ltr">CeFi is a term used to describe cryptocurrency exchanges like Binance and Gemini, where all financial transactions are handled by a single central authority. Users of centralized platforms have much less control over their assets because the service holds their assets and private keys, but these platforms offer additional regulatory protection.</p><p dir="ltr">The interim solution might involve combining CeFi businesses with DeFi offerings. This model maintains the user's sovereignty while adding some authority and additional liquidity to decentralized crypto exchanges.</p><h2>What is CeDeFi?</h2><h3>The definition</h3><p dir="ltr">CeDeFi combines the best elements and characteristics of CeFi and <a href="https://www.builder.news/sub-category/defi" alt="DeFi" title="DeFi" target="_blank" rel="" class="">DeFi</a> into one financial system.</p><p dir="ltr">Financial systems have been divided into centralized finance and decentralized finance for some time. DeFi is based on cryptocurrencies and smart contracts, whereas CeFi is a conventional, bank-enabled finance system.</p><p dir="ltr">Centralized and decentralized finance are combined in a new system known as "CeDeFi," which has emerged and is gaining popularity. What is CeDeFi and how does it operate, then?</p><p dir="ltr">CeDeFi, which is centralized and provides the same features as DeFi protocols, enables users to access DeFi products such as decentralized exchanges (DEXs), liquidity aggregators, yield farming tools, and lending protocols while retaining the benefits of CeFi systems.</p><h3>The origin</h3><p dir="ltr">CeDeFi has grown significantly as a result of Binance, whose CEO, Changpeng Zhao, first used the term in September 2020 during the introduction of the Binance Smart Chain.</p><p dir="ltr">Binance also understood that it had to develop a different blockchain network to start competing with Ethereum and its DeFi ecosystem given that Ethereum's popularity is due to the functionality of smart contracts. Because of this, Binance changed the name of its current blockchain network to BNB Smart Chain, an Ethereum fork with improvements for low fees and high transaction throughput.</p><p class="prosemirror-p-center"><img src="https://cdn.builder.news/news/11ed4071e9cd5028a8e6023f659fee92.jpg" alt="bnb-chain" title="bnb-chain" width="600" height="338" class="lykafe0"></p><p dir="ltr">Decentralization and censorship resistance is sacrificed, but it still appears to be working. Despite being criticized by proponents of decentralization, BNB Chain experienced exponential growth beginning in September 2020 as a result of its speedy project funding, which contributed to the emergence of CeDeFi.</p><p dir="ltr">Investors can create hedged yield streams through current digital strategies using Midas' hybrid CeDeFi investing platform in addition to Binance for dependable passive income. In addition, Midas asserts to have a sizable backend infrastructure in a volatile cryptocurrency market that works to safeguard and hedge the front-end investment options made available to small investors.</p><p dir="ltr">The Midas digital ecosystem has been safeguarded by integration with the extremely secure Fireblocks cryptocurrency custody and transfers technology. FireBlocks offers commercial-grade digital protection for assets in stored custody.</p><h2>The benefits of CeDeFi</h2><p dir="ltr">The CeDeFi financial system can enhance both centralized and decentralized cryptocurrency systems in the following ways.</p><ul><li><p dir="ltr"><strong>Higher liquidity:</strong> Scaling DeFi infrastructures will undoubtedly be aided by integration with centralized cryptocurrency exchanges or traditional financial markets with market capitalizations exceeding $100 trillion.</p></li><li><p dir="ltr"><strong>Enhanced crypto access:</strong> There will be more trading opportunities as a result of integrating DeFi apps with centralized finance. To increase their returns, users can investigate additional cryptocurrencies, NFT, liquidity providers, lending and borrowing protocols, and yield farming tools.</p></li><li><p dir="ltr"><strong>Governance at the institutional level:</strong> Large organizations can manage intricate supply chains, reconcile multiple databases, and confirm the provenance of transactions with the aid of audit features offered by CeDeFi platforms.</p></li><li><p dir="ltr"><strong>Increased safety:</strong> Custodial services make sure platforms only use safe blockchain networks, which lowers the risk of fraud. Users will continue to enjoy greater privacy than they did on centralized platforms in the past. Instead of submitting personal documents, traders could instead use independent self-sovereign identity (SSI) systems to confirm their identity.</p></li><li><p dir="ltr">Cutbacks on transaction fees: The majority of transaction processes are automated by CeDeFi exchanges using smart contracts, with no participation from conventional financial institutions. This means that the transaction fees will probably be just as minimal as those on the majority of DeFi platforms.</p></li></ul><p dir="ltr">Cryptocurrencies and other digital assets are already being incorporated into applications by bigger financial institutions. According to Gartner's research from 2021, 20% of businesses will use cryptocurrencies by 2024 for high-yield investments in DeFi as well as payment and value storage.</p><h2>The downside</h2><p dir="ltr"><strong>The main drawback of CeDeFi</strong> is the steep learning curve associated with its complex protocols. Since the idea is still in its infancy, more user-friendly and intuitive user interfaces will undoubtedly develop over time.</p><p dir="ltr">Given that the majority of CeDeFi protocols are still developed on the Ethereum blockchain, CeDeFi also heavily relies on Ethereum. CeDeFi will likely fail if Ethereum does. However, this risk is reduced by the fact that CeDeFi protocols are starting to be adopted by other blockchains.</p><p dir="ltr"><strong>CeDeFi</strong> has the additional drawback of being relatively new and unproven. Despite the sector's rapid expansion over the past year, it is still in its infancy. CeDeFi protocols may not be prepared for widespread adoption as a result of their high level of volatility.</p><h2>Top CeDeFi platforms</h2><h3>Binance</h3><p dir="ltr">Decentralized finance is being actively incorporated into Binance's centralized exchange. The Binance Smart Chain (BSC) network, which enables users to create DeFi apps and smart contracts compatible with the Binance Chain, was introduced in 2020. Later, BSC and Binance Chain merged to form BNB Chain, an integrated open-source decentralization ecosystem that provides thorough cross-chain service, linkage liquidity, privacy protection, and safe custodian services.</p><p dir="ltr">Wrapped tokens were introduced by Binance as part of the Token Canal project, enabling the trading of unsupported assets on decentralized platforms. Additionally, the platform creates seed funds to help new DeFi projects get the security reviews and due diligence they need to enter its ecosystem.</p><h3>Unizen</h3><p class="prosemirror-p-center"><img src="https://cdn.builder.news/news/11ed4071e9cd5b23a8e6023f659fee92.jpg" alt="Unizen" title="Unizen" width="600" height="225" class="lykafe1"></p><p dir="ltr">The <strong>CeDeFi cryptocurrency exchange</strong> run by Unizen combines trades from various DeFi and CeFi platforms. It offers traders a safe trading environment and enables them to search for affordable deals on Binance, Sifchain, and Uniswap.</p><p dir="ltr">But this business is more than that. The CeDeFi Alliance was started in 2022 by a collaboration between Unizen and the venture capital fund Jun Capital. They hope to create a hybrid financial system in the future that integrates DeFi projects with international CeFi organizations.</p><h3>Midas Investment</h3><p class="prosemirror-p-center"><img src="https://cdn.builder.news/news/11ed4071e9cd6208a8e6023f659fee92.jpg" alt="Midas Investment" title="Midas Investment" width="600" height="501" class="lykafe2"></p><p dir="ltr">In August 2022, Midas.Investments updated its platform to include CeDeFi strategies. The new strategy, according to the Midas team, aims to mirror DeFi by developing smart contracts to manage assets in accordance with various lending protocols. These include soft leverage, lending, and borrowing, all of which should enable a capital inflow into the DeFi market.</p><p dir="ltr">Midas, like many other CeDeFi projects, aims to give its clients access to hedged instruments from CeFi while also offering DeFi options that are customized to their risk profiles. Let's first examine CeFi and DeFi in order to comprehend CeDeFi more fully.</p><h3>Nexo</h3><p class="prosemirror-p-center"><img src="https://cdn.builder.news/news/11ed4071e9cd66c5a8e6023f659fee92.jpg" alt="nexo" title="nexo" width="600" height="338" class="lykafe3"></p><p dir="ltr">Nexo is a strictly regulated digital credit line platform with dynamic DeFi infrastructure. It actually entered the Chainlink decentralized blockchain oracle network to expand its lending offerings with decentralized assets. The network provides its users with on-chain audit trails for lending business, as well as consistent exchange rates for interest payments and automated collateralization checks. This company, like Binance, aims to close the gap between centralized and decentralized finance.&nbsp;</p><h3>SmartFi</h3><p class="prosemirror-p-center"><img src="https://cdn.builder.news/news/11ed4071e9cd6b1fa8e6023f659fee92.jpg" alt="cedefi-smartfi" title="nexo" width="600" height="338" class="lykafe4"></p><p dir="ltr">SmartFi is a CeDeFi cryptocurrency lending and borrowing protocol that works with traditional banks. It provides an on-chain hedge process that ties its tokens (SmartFi USD) to the network's value. Simply put , traders receive a mineable stablecoin that they can exchange for a value in fiat currency.</p><p dir="ltr">This financial model outperforms bank interest rates while claiming to be more dependable than yield farming, staking, and liquidity mining. Despite market volatility, the company raised more than $10 million in the first weeks after its launch in late 2021 and keeps a steady market value.</p><p><strong>Conclusion</strong></p><p dir="ltr"><strong>CeDeFi</strong> is moving toward becoming widely used. With sufficient regulatory guidance, according to Gartner analysts, 2022 might be the year when it is prepared for widespread enterprise adoption.</p><p dir="ltr">Although DeFi services can do away with many of the restrictions of conventional finance, they also bring with them a number of issues. And for that reason, CeDeFi is such a powerful trend in cryptocurrency. It addresses the primary issues with decentralized apps, namely the lack of compliance, security, and liquidity, in exchange for some governance. It is wise to consider reaping the benefits of the CeDeFi market before it is finally open to regular users and desirable to financial institutions. Hope that you've had a good read with <a href="https://www.builder.news/" alt="Builder news" title="Builder news" target="_blank" rel="" class="">Builder.news</a>!</p><div class="pr-block-special"><strong>Disclaimer:</strong><br>This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.</div>

How CeDeFi platforms operate and why centralization is a major trend in the cryptocurrency market will be demonstrated in this article

CeDeFi: the convergence of centralized and decentralized finance