Quick Comparison: DeFi vs CeFi
| Feature | DeFi | CeFi |
|---|---|---|
| Meaning | Decentralized Finance | Centralized Finance |
| Control | Self-custody | Platform |
| Intermediary | None | Company |
| Regulation | Minimal | Heavy |
| Examples | Uniswap, Aave | Coinbase, BlockFi |
What is DeFi?
DeFi is finance without banks. Smart contracts replace intermediaries — you can lend, borrow, trade, and earn yield without giving anyone custody of your funds. It's permissionless (anyone can use it) and transparent (all code is public).
The tradeoff is risk. Smart contract bugs can drain pools. There's no customer support if you make a mistake. And the UX, while improving, still confuses normies. DeFi is powerful but unforgiving.
What is CeFi?
CeFi is what it sounds like — crypto through traditional companies. Coinbase, Kraken, BlockFi (RIP). You deposit funds, they hold custody, and you trust them to not FTX you.
The upside is simplicity and (sometimes) insurance. The downside was on full display in 2022: Celsius, Voyager, FTX, and BlockFi all collapsed, taking customer funds with them. "Not your keys, not your coins" isn't just a meme.
Key Differences
- Custody: DeFi = you hold keys, CeFi = company holds keys
- Trust: DeFi trusts code, CeFi trusts companies
- Access: DeFi is permissionless, CeFi requires KYC
- Support: CeFi has customer service, DeFi has Discord
- Risk: DeFi = smart contract bugs, CeFi = insolvency
- Regulation: CeFi is regulated, DeFi is mostly not
Which Should You Choose?
Choose DeFi if: You understand the tech, want full control, and can handle the risks. Higher yields, but no safety net if things go wrong.
Choose CeFi if: You prefer simplicity and don't want to manage your own keys. Just use only regulated exchanges, never leave large amounts on platform, and remember 2022.
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