CeDeFi (Centralized Decentralized Finance) is a combination of centralized finance (CeFi) and decentralized finance (DeFI). CeDeFi offers the same features as DeFi protocols while being centralized, allowing people to access DeFi products like decentralized exchanges (DEXs), liquidity aggregators, yield farming tools, and lending protocols, yet still leveraging the advantages of CeFi systems. ^[1][9]

Overview

Centralized finance (CeFi) offers established institutions, regulations, and familiar user experience. Decentralized finance (DeFi), on the other hand, seeks innovation, accessibility, and the potential to disrupt traditional financial models to merge the strengths of both worlds, creating a hybrid system that leverages the best of both CeFi and DeFi.

The following are key elements of CeDeFi:

• Centralized: CeDeFi platforms are typically operated by established financial institutions like banks or fintech companies. This means they have a central authority responsible for managing the platform and ensuring compliance with regulations.
• Decentralized: CeDeFi platforms often utilize blockchain technology and smart contracts to automate certain processes and provide transparency. This can involve features like on-chain asset tokenization, peer-to-peer lending, and automated yield generation.

CeDeFi is a hybrid of the centralized and decentralized financial model that aims to improve the traditional cryptocurrency model to allow for faster transactions, improved security, a larger transaction volume and comparatively lower fees. In CeDeFi, certain aspects of financial services are centralized, while others remain decentralized. This approach aims to strike a balance between the efficiency and accessibility of centralized financial systems and the trustlessness and decentralization of blockchain and cryptocurrency technologies.^[5][7][6][8]

CeDeFi is a type of decentralized finance protocol that enables the creation and trade of synthetic assets. It does not rely on lending or borrowing platforms. Instead, it uses a system of smart contracts to mint new tokens that track the price of underlying assets. This allows users to trade derivatives without having to trust a centralized party.^[2]

Benefits of CeDeFi

• Increased access to DeFi: CeDeFi makes DeFi products and services more accessible to a wider audience, particularly those who are wary of the inherent risks and complexities of fully decentralized platforms.
• Enhanced security and stability: CeDeFi platforms benefit from the established security and regulatory frameworks of traditional financial institutions, potentially mitigating some of the risks associated with DeFi.
• Improved user experience: CeDeFi platforms can offer a more user-friendly experience compared to traditional DeFi protocols, often with familiar interfaces and streamlined onboarding processes.
• Greater innovation: CeDeFi fosters collaboration between centralized and decentralized players, potentially leading to the development of new and innovative financial products and services.

Challenges of CeDeFi

• Centralization concerns: While CeDeFi offers benefits, it also raises concerns about the potential loss of some of the key advantages of DeFi, such as censorship resistance and complete community governance.
• Regulatory uncertainty: The regulatory landscape surrounding CeDeFi is still evolving, which can create uncertainty for businesses and users.
• Technical complexities: Integrating centralized and decentralized technologies can be challenging, requiring significant expertise and infrastructure development.

CeDeFi Examples

Binance Smart Chain

Binance Smart Chain is a blockchain network that runs parallel to the Binance Chain, the native blockchain of the Binance cryptocurrency exchange. Binance Smart Chain supports smart contracts and DeFi applications, while also offering fast transactions, low fees, and cross-chain compatibility with Binance Chain and Ethereum.^[10]

Midas.Investments

Midas.Investments is a custodial crypto-investment platform that offers CeDeFi strategies to its clients. Midas.Investments uses smart contracts to handle asset management under various lending protocols, such as Aave, Compound, and MakerDAO. Midas.Investments also provides access to hedged instruments from CeFi, such as futures and options.^[11]

ChangeX

ChangeX is a hybrid DeFi project that completed its ICO in 2024. It presents a CeDeFi ecosystem that merges crypto, DeFi, and banking. At the center of the ecosystem lies the ChangeX non-custodial wallet. It embodies composability by introducing all the tools needed to navigate the DeFi space. Some of the features it possesses include a personal IBAN (International Bank Account Numbering) and SEPA (Single Euro Payment Area) integration, cross-chain functionality, a crypto visa card, and leveraged staking.^[13]

CoinZoom

CoinZoom bridges the gap between traditional finance and cryptocurrencies through its native ZOOM token. Users can generate passive income by staking ZOOM by supporting Algorand and Dash. As a regulated exchange, CoinZoom allows users to invest in more than 30 listed tokens and offers a Visa debit card for spending on crypto.^[13]

Unizen

Unizen is an exchange ecosystem that combines infrastructure involving both centralized and decentralized elements aiming to solve issues with liquidity, slippage, and KYC. Unizen is the first CeDeFi exchange to combine the functionality of first-party and third-party CEX’s and DEX’s in order to meet the needs of both retail and institutional traders. Unizen has a hybrid exchange with three major components – Unizen’s custom logic, third-party modules, and Unizen modules. The Unizen modules contain in-built products such as the platform’s CEZ, while the third-party modules support DeFi integrations.^[13][14][15]

ByBit

ByBit is a cryptocurrency derivatives market that sells Ether and Bitcoin futures. ByBit offers its centralized products in a more decentralized way. This allows users to experience a more CeDeFi-centered ecosystem which is built around the platform’s existing products. ByBit provides users with two options – the first is to follow legacy financial standards and the other is to develop decentralized products. ByBit offers perpetual swaps on Bitcoin, EOS, Ether, and Ripple XRP.^[13]

SmartFi

SmartFi is a CeDeFi cryptocurrency lending service that is integrated with several traditional financial institutions. It ties its native token, SmartFi USD, to the value traded on the network by using an on-chain hedge mechanism. SmartFi provides a minable stablecoin which is returnable for a full refund of the purchase price in fiat.^[13]

Use Cases

Lending and Borrowing

Lending and borrowing in CeDeFi combine the efficiency of centralized systems with the security of decentralized platforms. CeDeFi lending allows users to earn interest on assets while retaining control, adhering to regulatory standards, and ensuring global accessibility. Borrowing provides quick access to capital without traditional credit checks, with diverse use cases and privacy features. Both activities leverage smart contracts, enhancing transparency and automation, making them integral to the flexible and inclusive CeDeFi ecosystem.^[1][3]

Stablecoins

CeDeFi stablecoins provide stability and regulatory compliance while still being used for trading, remittances, and other financial services in the blockchain space. Stablecoins are fundamental to CeDeFi offering stability, liquidity, and efficiency. They combine the best of centralized and decentralized systems, making them a reliable medium of exchange, store of value, and essential for trading and lending in the CeDeFi ecosystem.

Cross-Chain Integration

Cross-chain integration in CeDeFi allows different blockchain networks to interact seamlessly by promoting interoperability, enabling assets and data to move efficiently between various platforms. This integration combines the efficiency of centralized systems with the decentralization of blockchain technology, offering users diverse financial services and assets while retaining control over their holdings. Cross-chain solutions enhance liquidity, diversify assets, and bridge the gap between CeDeFi and Decentralized Finance (DeFi) ecosystems.^[1]

Decentralized Identity

CeDeFi systems can support decentralized identity solutions, providing users with secure and verifiable digital identities. Decentralized Identity (DID) is a vital component of CeDeFi. It empowers users with control over their identity data, promoting self-sovereignty and privacy. DIDs are interoperable, facilitating global access and reducing identity fraud while still adhering to privacy and data protection regulations.