CeFi vs DeFi

Good day to you all, crypto newbies and OGs

Today, we’re about to dive deeper into another crypto hot topic - DeFi. If you’re itching to know more, grab a seat; we’re about to #ExplainItLikeImFive.

To understand what DeFi brings to the table, let’s first take a look at traditional finance.

Traditional finance, or CeFi (short for Centralized Finance), is all about middlemen. Banks, exchanges, and other big companies that help you handle your money.

Their trademarks? Well, let’s just say that to set up an account, you need to go to a branch, wait in a nice, long queue, ID in hand, proof of address and all, and fill out a form with all your details (father’s middle initial and star sign included) and then patiently wait to see if you make the cut. All this during business hours, of course.

Want to borrow some money? You guessed it - More queues, more paperwork, more approvals required, more headaches.

Of course, it’s not the same everywhere, some banks really try to embrace digitalization and are doing everything they can to adapt, but the truth is most of them don’t.

At the opposite pole, there’s DeFi (Decentralized Finance). Here, anyone can create an online account in a few clicks and manage their own money by themselves. It doesn’t matter who you are or where you’re from; if you have an internet connection, you’re in the club. No queues, no approvals, no bank holidays or business hours here. Want to exchange some money at 3 AM on Christmas Eve? No biggie - DeFi doesn’t sleep.

But it doesn’t stop at swaps. Users can also get actively involved and become part of the system by providing liquidity and/or farming on decentralized exchanges and accessing other financial instruments like lending and borrowing. Moreover, because DeFi is built on top of blockchains, the rules are clearly written into lines of code, and everything is fully transparent. Anyone has full access to the transaction history, unlike traditional finance where the system is completely opaque. Think of it like a city made of see-through plexiglass, as opposed to concrete.

TL;DR: DeFi sets you free of middlemen and puts you in control of your finances. What is perhaps worth mentioning is that, just like in the case of non-custodial wallets, this freedom and control comes with added responsibility. It's essential to conduct thorough research, invest only what you can afford to lose, and maintain a level head, not allowing emotions to dictate your decisions.

Now, which one is right for you it’s for you to decide, all we know is that here at #xPortal we like our freedom.

What about you?