The purpose of cryptocurrency from its creation has been to offer users fair privacy and security of their assets. However, the level of privacy users enjoy today as regards their digital assets depends on the exchange they interact with when it comes to the sales of their digital assets. While Defi offers high privacy and security of assets, some Cefi does not satisfy this needed privacy as they now require their users to complete some identity verification process known as KYC before they can use their exchange for transactions.
This work has therefore exposed the major difference between the defi and Cefi crypto exchanges. You will also learn from this work the advantages and disadvantages of using both the Cefi and Defi crypto exchanges. This will help you in deciding which crypto exchange is best for you to deal with when you want to buy the BNB coin or any other cryptocurrency.
What is Defi in Cryptocurrency trading?
The word defi is short for decentralized finance. Defi is used to describe those crypto exchange platforms that offer users the desired privacy while exchanging their digital assets. The Defi platforms are usually built on a blockchain and do not require the user to complete any identity verification process (KYC) before using the platform. The activities carried out on the Defi platforms are not regulated or monitored by a third party.
What is Cefi?
The term Cefi is a broad term used to cover the centralized crypto exchanges for buying and selling Cryptocurrencies today. The word Cefi is in itself an acronym for ‘Centralized Finance’ in crypto jargon. When a crypto exchange is centralized, it means that the activities are controlled and monitored by the owners of the exchange.
While using a Cefi platform, the user’s digital assets are stored on a unique wallet provided by the exchange. Users will therefore need to login into the exchange to access their digital assets. Also, there is no private key given to users of the Cefi platforms. Instead, they are required to create their login details and password for assessing their account with the centralized exchange.
Difference between Defi and Cefi
| Defi | Cefi |
| Offers users the desired privacy | There is a limit on the privacy the user enjoys are some Cefi platforms require KYC before using their platforms. |
| The individual has full control over their digital assets | The assets are usually controlled by the platform. |
| It is cheaper to hold assets on Defi platforms. | Commissions are charged for using the Cefi platforms. |
| It is very difficult to recover lost assets as transactions cannot be traced. | All transactions using the Cefi platforms can easily be traced. |
| Often difficult to convert digital assets into fiat currencies. | Makes it very easy to convert digital assets into fiat currencies. |
Advantages of using Defi
- Offers users the desired privacy.
- Allows users to take full control over their digital assets.
- Assets are usually protected by private keys.
Disadvantages of using Defi
- Exposed to attack and hacking
- It is usually difficult to recover lost assets
- Gives room for money laundering
Advantages of using Cefi platforms
- Supports borrowing and lending of digital assets
- Makes it easy to buy and sell various Cryptocurrencies.
- Provides large liquidity for trading
Disadvantages of using Cefi platforms
- Not all cryptocurrencies are provided by a given Cefi platform.
- Commissions are charged for using the Cefi platforms.
- Users are required to provide their identification details before using the platform.
List of Best ten Cefi platforms
- Kucoin
- Coinbase
- eToro
- Capital.com
- Binance
- Huobi Global
- Kraken
- Bitfinex
- Kraken
List of Best ten Defi platforms
- Uniswap
- Aave
- Synthetix
- CurveFinace
- Balancer
- AirSwap
- Pancakeswap
- 1inch
- dYdX
- Chainlink
