Ever since cryptocurrency was introduced to the world, the financial landscape has been experiencing a profound shift with the emergence of two contrasting financial paradigms: decentralised finance (DeFi) and centralised finance (CeFi).

Both approaches offer unique advantages and challenges, catering to different needs within the crypto community. By the end of this discussion, you’ll have a clearer understanding of which platform aligns best with your financial goals.

But before we pit these two against each other and compare their differences, let’s have a quick rundown of what these two are about.

Decentralised Finance (DeFi)

It’s basically a move to move away from traditional banking, where corporations would monopolise and have full autonomy over rules and regulations, together with the supply and demand of commodities and currencies.

To curb it, the concept behind decentralisation started at the same time as Bitcoin’s whitepaper launch. It was a whole new concept to address issues such as corporations and governments controlling the world’s finances, double payments, slow transactions, and expensive fees.

In contrast, decentralised exchanges (DEXs) enable users to engage in direct cryptocurrency trading without any middleman or KYC, making the transactions private and anonymous.

Centralised Finance (CeFi)

This includes finances that are governed by a body, entity, or individual, yes that means traditional finances like banks as well. However, most of the time, CeFi merely refers to centralised cryptocurrency finance platforms.

Even though the crypto ‌sphere is all about the wonders of decentralisation, the protocol on DeFi has its flaws too. So, a number of centralised cryptocurrency exchange platforms have emerged since then to address the issues.

Centralised exchanges (CEXs) are managed by the organisations and entities behind them, and they are responsible for overseeing the exchange’s security, liquidity, and overall functionality. They’ll help to safe keep your funds for your trades and transactions while simplifying the process of buying and selling cryptocurrencies. CEXs are usually more compliant with regulations and would request KYC for various identification purposes.

5 Core Differences Between DeFi and CeFi Platforms

There has always been a big, ongoing debate about DeFi exchanges and CeFi exchanges being better than the other. Neither is totally superior as they both have their own unique functions and serve their own purposes. They are just tools and marketplaces for traders to utilise according to their needs. Here are five core differences between both types of platforms.

Operational structure

DeFi uses blockchain and smart contracts for peer-to-peer trading without any central authority, offering trustless automation. All the transactions are designed to run without human interactions.
CeFi platforms function as intermediaries, managing order books, requiring user accounts, and custody of funds. Traders can choose and pick their trades manually or automatically.

Wallet storage

In DeFi exchange platforms, users typically use their own crypto wallets where they hold their own private keys to their funds.
In CeFi exchange platforms, users would deposit part of their funds on the platform’s online hot wallet, which is tied to their account.

Security

In DeFi platforms, everyone is responsible for their own transactions and actions. If ‌there are any hackers lurking about to take advantage of poorly written smart contracts, there’s no one stopping them.
Whereas on a centralised platform, it’s the platform’s duty to keep the platform secure and safe from hackers so that their users can trade safely.
In any case, the user has to double, triple, and quadruple-check the wallet addresses before transferring. 

Regulatory Approach

CEXs require KYC and AML while aligning with regulations, making them suitable for those who want the assurance that comes with it.
DEXs however, prioritise user autonomy and privacy, appealing to those seeking a more self-sovereign, anonymous trading experience, often with fewer regulatory checks in place.
It might sound odd, but not everyone in the crypto sphere is pumped for total decentralisation. Striking a balance is crucial, with many centralised platforms evolving to adopt decentralised elements.

Accessibility

You might want to consider whether the platform offers a mobile app for convenient on-the-go trading or if it’s only accessible through desktop and web interfaces.
Most DEXs do not offer mobile apps, whereas many CEXs do.
It’s not a mandatory option, but a mobile app would work wonders to help you trade whenever and wherever you need it.

Choosing Your Platform of Choice

CEX platforms are evolving to adopt features reminiscent of DEX exchanges in response to changing market sentiments. However, at the core, it’s crucial for users and traders to know what the platform’s functions are and thoroughly understand how things work there.

TEX’s Edge on the Market:

No matter what you choose as your platform of choice, the most important thing is that it serves its purpose as intended and it suits you. Here are some features that TEX’s platform offers to its users, traders, and investors.

Secure

We have KYC and multiple authentication methods to make sure your account is genuinely yours and the rightful owner is logging in. 

Passive Income Streams

Everyone loves extra income! Aside from the usual trading and HODL-ing, on TEX, you can participate in staking pools to help generate more income from your crypto.

Easy to Use

DeFi platforms can be pretty confusing for inexperienced users, especially if they are not used to it. On TEX, the user experience is streamlined and easy to understand. Users can also choose to change their dashboard from a simple minimalist lite mode to a professional mode to suit their trading styles.

Fast Transactions

In finance and investment, time is money and every second counts and we value your time just as much as you value your funds with us. Our platform is optimised to work as fast as your device and internet provider can.

At the end of the day, whichever platform you wish to go with, be it decentralised or centralised, it should always suit your ideals, trading style strategy, views, skills, and needs.