Decentralized finance (DeFi) has grown in popularity to become a billion-dollar market that’s giving users the same financial products as in traditional finance (TradFi), plus earning additional opportunities. These are liquidity provider fees or governance tokens earned through yield farming. However, the lack of regulation in DeFi has raised a lot of concerns about criminals using protocols to launder money and finance illegal activities. This is where CeDeFi comes in.
Read on to learn what CeDeFi is and how it compares to DeFi and CeFi.
What is CeDeFi?
CeDeFi stands for centralized decentralized finance, a term referring to a financial system that merges the features and benefits of CeFi and DeFi.
Hence, CeDeFi offers the DeFi products like yield farming, lending, borrowing, liquidity staking, and token swapping, which are available on DeFi protocols while being compliant in terms of regulations.
CeDeFi addresses the lack of regulation in the crypto space. It does this by complying with the regulations that help law enforcement agencies identify potential criminals in a more straightforward way.
CeDeFi is also characterized by centralized entities that use similar governance structures known from the traditional financial sector. Nonetheless, it embraces the efficiency of decentralized finance, thereby reducing costs.
The Role of Binance in the Creation of CeDeFi
One of the largest centralized crypto exchanges, Binance, launched its own blockchain in April 2018. The goal was to create a network with high throughput and able to process many transactions per second. The blockchain was named Binance Chain (later rebranded to BNB Beacon Chain).
The network used the Tendermint consensus model and focused on a primary app, the Binance DEX, rather than on multiple applications. However, DeFi was thriving on Ethereum, and the Binance DEX wasn’t making much traction. As a result, Binance realized…
