The financial world has been taken by storm with the new trading method with the advancement in the blockchain technology and cryptocurrencies. Cryptocurrencies have been in the financial industry for over a decade now and it's only recently that it has made it into the headlines for being a profitable mode of income for the future. They were created with the aim to decentralize the financial trading ecosystem. It helps to transfer assets and money digitally across the world without the involvement of any central authorities like banks for processing the transactions.
Before the emergence of Cryptocurrencies only traditional financial systems were available like payments, borrowing or lending with cash (fiat currencies like dollars, euros, rupees, etc) through established banks and institutes. But now, blockchain technology has transformed the scenario. Cryptocurrencies have caused many other significant innovations like ICOs (Initial Coin Offering) and Smart Contracts to emerge and De-Fi (Decentralized Finance) is the latest innovation that has the potential to change the entire financial industry forever.
The discussions about this new concept of cryptocurrency started expanding gradually and shifted to new considerations like Ce-Fi and De-Fi. So, let us find out how these new finance systems affect everyone.
What Is Decentralized Finance (DeFi)?
De Fi is an emerging financial service that is based on a secured distributed ledger system that uses a set of algorithms and smart contracts for service execution. This contract system is automated and removes the need of any intermediary like a bank or financial institution who has the money, financial assets or services.
- ● Money can be securely stored in a digital wallet instead of a bank
- ● It doesn’t charge any extra fees like the banks or other financial institutions to use their service.
- ● Funds can be within seconds and minutes
- ● You just need to have an internet connection without needing approval to use it.
What Is Centralized Finance (CeFi)?
Before DeFi came into existence, CeFi was the only standard mode of trading cryptocurrencies. In Centralized Finance, all the money and trade orders were handled though central intermediaries like banks and financial companies whose only aim was to make money. This means that you don't have any private key to get access to your wallet because Ce-Fi is full of third-parties who facilitated the money flow among parties and charged extra fees for using their services.
CeFi guaranteed fair trading and fund security on such funds. Traditional investors can participate in crypto trading as well. However, both these models have their own set of benefits. It’s all up to the investor and their needs. IF you hire our Crown Hill IT Solutions crypto expert, you will definitely have a good idea to choose the best one for your business.