What is CeFi and how does it differ from DeFi?

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CeFi and DeFi are two different kinds of cryptocurrency platforms which gives various financial services to their clients. Here we talk about explanation of each one and discuss their advantages and disadvantages.
Not very long ago, Cryptocurrencies were invented with the intent of decentralizing the financial trading system but they were just limited to trading. However, going a step further Decentralized Finance (DeFi) was created, that not only supported trading of cryptocurrencies but also had several use cases such as lending crypto loans, crypto derivative trading like Bitcoin Futures, tokenizing digital assets etc.
What is Centralized Finance (CeFi) and Decentralized Finance (DeFi)?
Once cryptocurrency was discovered, businesses have been searching for ways to use it for various kinds of financial services. To manage them, there are two different platforms that are available,
1) Centralized Finance (CeFi) exchanges act as an intermediary to manage the crypto transactions and activities of traders
2) Decentralized Finance (DeFi) exchanges which eliminate the need of any third party to control the activities of traders, allowing technology to take over and users having authority to manage their transactions and deals.
The main motive of both Decentralized Finance (DeFi) platforms and Centralized Finance (CeFi) platform remains the same, which is to facilitate users to use cryptocurrencies for all of their financial needs and services. But the way they both execute is different.
Difference between Centralized Finance (CeFi) and Decentralized Finance (DeFi)
There are many ways in which Centralized Finance (CeFi) is different from Decentralized Finance (DeFi). BinanceCoinbase, Libra etc are well-known CeFi exchanges that have been carrying out crypto-financial services. Users typically create an account with these platforms and use the platform to primarily transfer and receive funds. But they not only provide crypto trading services but also support other services such as lending, borrowing, margin trading etc. Hence, the more the number of services a CeFi exchange offers, the more the number of clients. Since these are entities that are established and have been there for a while, trades trust them while providing intimate and confidential information about themselves. However, since these are centralized platforms, there is always a possibility of data security breach and thefts as these platforms are vulnerable to cyber attacks and data leaks.
One of the advantages of Centralized Finance (CeFi) over Decentralized Finance (DeFi) is that they support cross chain exchange for multiple cryptocurrencies, although these cryptocurrencies are generated on individual blockchains, thus displaying interoperability of cryptocurrencies. CeFi platforms also allow the conversion of fiat currency to cryptocurrency and vice-versa in an easy and simple way.
Decentralized Finance (DeFi)
Due to its decentralized nature, DeFi is the best when it comes to protection of personal data. Users are the only owners of their data, hence there is no chance of funds being stolen or misused or vulnerable to thefts. Users are responsible for managing their own funds and activities. As Decentralized Finance (DeFi) is hosted on a Blockchain platform like Ethereumsmart contracts can automatically execute transactions when a specific condition is fulfilled. Since smart contracts are automatic, traders can be fully assured that transactions will never fail and will be executed correctly. Users do not need any permission to join a Decentralized Finance (DeFi) exchange since it is permissionless, which is not the case in Centralized Finance (CeFi) platforms.
But, DeFi platforms have been lacking in offering services such as cross chain exchanges. Since the process of cross chain exchange is cumbersome and complicated, DeFi platforms fail in providing this interoperability. But with growing technology in this sector, Decentralized Finance (DeFi) exchanges have been able to offer alternatives in this regard.
Some of the biggest examples of Decentralized Finance (DeFi) exchanges are Kyber, Totle, MakerDAO etc.

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