With the onset of the blockchain-enabled Web3 revolution, financial systems as we know them globally have been divided into two categories. These are — the traditional, bank-enabled centralised finance (CeFi) and the emerging crypto-backed system called decentralised finance (DeFi). While people are still understanding the difference between CeFi and DeFi, a brand-new classification of financial systems has emerged and is popularly abbreviated as ‘CeDeFi’. Essentially, CeDeFi is the combination of some elements of traditional finance with the new age nuances of the DeFi space.
Investors interested in exploring the flexibility that DeFi offers, but are concerned about facing negative consequences, can turn to CeDeFi for a comparatively safer experience.
The CeDeFi term is known to have been coined by the CEO of Binance, Changpeng “CZ” Zhao, when Binance launched its Binance Smart Chain (BSC) in September 2020.
The BSC kicked off a $100 million (roughly Rs. 800 crore) seed fund designed to foster the collaboration between CeFi and DeFi in 2020. The aim was to grab potential DeFi adopters by placing their trust on something they are familiar with – centralised finance.
CeDeFi can help people explore DeFi products, such as decentralised exchanges (DEX), liquidity aggregators, yield farming tools, and lending protocols — but with the assurance of CeFi systems.
Binance, for instance, started allowing its users to stake its BNB native token and earn cultivated tokens of other upcoming projects backed by Binance.
This allows users to earn some of the benefits of being exposed to DeFi, without the burden of interacting directly with DeFi protocols.
This system attracted other networks to tweak their systems to keep some parts of DeFi, while making sure that centralised parties can also be accessible for users.
As per NASDAQ, while DeFi had roughly $250 billion (roughly Rs. 19,97,200 crore) in total value locked (TVL) around January, CeFi is much more accustomed to handling trillions — the global equity market cap is estimated to be over $100 trillion (roughly Rs. 79,82,24,000 crore), a staggering amount greater than DeFi.
In recent times, CeDeFi brands are seemingly gaining prominence in the crypto world.
Unizen, a hybrid smart exchange ecosystem, is a prominent name in the CeDeFi space.
In June, Unizen bagged a ‘funding commitment’ of $200 million (roughly Rs. 1,600 crore) from the investment firm Global Emerging Markets.
In May 2022, EvryNet, a financial services platform announced a strategic merger with Velo Labs, a leading blockchain infrastructure company focused on improving international remittances.
At the time of the merger, both the companies showed confidence that this merger will position the reformed Velo as a forerunner in CeDeFi space.
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