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ToggleFinance has always been an important part of our lives. With the evolution and tremendous development of technology, a new financial system has been established, also known as decentralized finance (DeFi), which was created to solve the problems of traditional finance, also known as centralized finance (CeFi). In this article, Allinstation will distinguish the differences between DeFi and CeFi!
Concepts of DeFi and CeFi
What is DeFi (Decentralized Finance)
DeFi is decentralized finance, operating on blockchain. DeFi allows people to transact and manage assets without going through traditional intermediary organizations (banks, exchanges).
What is CeFi (Centralized Finance)
CeFi, or centralized finance, includes traditional financial services and centralized cryptocurrency platforms. In CeFi, intermediary financial organizations such as banks, exchanges, and financial companies play a crucial role in managing and controlling users' assets. CeFi ensures strict management and compliance with legal regulations.
[The rest of the translation follows the same pattern, maintaining the structure and translating the content to English while preserving the <> tags]Uniswap is the leading decentralized exchange (DEX), primarily operating on Ethereum. The project uses an AMM (Automated Market Maker) model, allowing users to swap tokens without intermediaries. With a user-friendly interface, Uniswap has become an icon of DeFi, providing quick and transparent trading capabilities.
AAVE
Aave is a top lending and borrowing platform in DeFi. Users can deposit assets to earn interest or borrow assets with collateral. Notably, Aave offers a unique "flash loan" feature, allowing loans without collateral if the transaction is completed within the same block.
MakerDAO
MakerDAO is the project behind the decentralized stablecoin DAI, supported by collateralized assets on Ethereum. Users can lock assets to mint DAI, helping create a stablecoin with stable value. MakerDAO is an important platform in the DeFi ecosystem, promoting the development of decentralized stablecoins.
Compound
Compound is a decentralized lending protocol that allows users to deposit assets to earn interest or borrow by collateralizing assets. Interest rates on Compound change according to market supply and demand, and users are also rewarded with governance token COMP, increasing their ability to participate in platform management.
Lido Finance
Lido is a top DeFi protocol in liquid staking, allowing users to stake assets (such as ETH, SOL, MATIC) to receive rewards without completely locking assets. When staking, users receive representative tokens (e.g., stETH), which can be used in other DeFi protocols to optimize profits. With a decentralized validator network, Lido ensures safety, transparency, and helps users participate in ETH staking without meeting the minimum threshold of 32 ETH. Lido is currently the largest liquid staking protocol, driving flexibility and efficiency in the Proof-of-Stake ecosystem.
Conclusion
DeFi and CeFi both have their own advantages and disadvantages, serving different user needs. DeFi provides freedom, transparency, and global access, while CeFi offers high security, good customer support, and large liquidation. Choosing between DeFi and CeFi depends on specific needs and individual risk tolerance.
In the future, we may see a combination of both models to create a more comprehensive and flexible financial system, such as Binance Web3 Wallet and OKX Web3 Wallet.
