DeFi vs CeFi — Do you really know the difference?

Centralised or decentralised, what is your go-to?

In the past, banks and financial institutes handled all trades, transactions, and payments. However, all of this changed with the introduction of cryptocurrency and blockchain technology.

With the increasing popularity of cryptocurrency, discussions grew around shifting from centralised finance to decentralised finance, encouraging more direct and transparent practices.

What is CeFi?

Centralised Finance is any financial activity that goes through a central authority which receives, registers, verifies, and stores information and transactions. Banks and financial institutes are classic examples of CeFi practices.

With the growth of cryptocurrency usage, more centralised exchanges started to emerge, facilitating transactions between crypto and Fiat money, margin trading, and lending.

CeFi exchanges handle your money, either through an e-wallet or an account, storing your information and activity. Also, transactions using CeFi include transaction and service fees and are prone to info leakage.

What is DeFi?

Decentralised Finance is any financial activity that does not go through any central authority. Therefore, the information is not registered or stored by any person or entity. However, activities on DeFi are stored on a public ledger to encourage transparency.

DeFi practices emerged with the increasing development of blockchain technology, crypto tokens, and cryptocurrencies. Using decentralised exchanges, users can directly send or receive only cryptocurrencies to another user without revealing their name, bank account, or location and only using a wallet address.

Decentralised Exchanges (DEX) are peer-to-peer transactions that take place directly on the blockchain, in the absence of a mediator or handling fees, and only using gas fees resulting from required operations to register transactions on the blockchain.

DeFi vs CeFi

CeFi entities are more established rooting for many years back, but DeFi is gaining more popularity lately. Here’s how we compare them.

Vault Hill is a blockchain-based technology company with an ecosystem consisting of Vault Hill City, an NFT marketplace, avatars with wearables, and XR consulting.

Our range of services leverage DeFi to buy $VHC tokens, minting NFTs in the VH Marketplace, and crypto staking.

Learn more about Vault Hill and follow us on socials here.