# CeFi vs DeFi

## What is centralized finance (CeFi)?

Before DeFi was introduced, centralized finance was the standard for trading cryptocurrencies. It handled a stronghold over the cryptocurrency industry. In centralized finance (CeFi), all crypto trade orders are handled through a central exchange. Funds are managed by specific running the central exchange, meaning that you don’t own a private key that provides you access to your wallet. The exchange identifies which coins they list for trading or how much fees you need to pay to trade with their exchange.

You don’t own your cryptocurrencies when buying or selling via a centralized exchange. Moreover, you are subject to the rules a centralized exchange imposes on you.

## What is decentralized finance (DeFi)?

No exchange is involved in the decentralized exchange. The complete process operates via automated applications that are developed on top of blockchain platforms. Decentralized finance offers a fair and transparent financial system where anyone can participate –– it allows unbanked people to access financial and banking services via blockchain technology.

DeFi aims to build an open-source, permissionless and transparent financial service ecosystem. Parallel to traditional finance, decentralized finance offers its own array of financial services, including borrowing, yield farming, crypto lending, asset storage and more.

The benefit of using DeFi over CeFi is that you have full control over your assets, and it enables users access to the vast array of decentralized applications (dApps) built on blockchain platforms.

## How is DeFi different from CeFi?

Though you would find many differences between DeFi and CeFi, the question is whether users should trust technology or people.

With DeFi, users trust that the technology will perform as proposed to execute on services being offered. On the other hand, with CeFi, users trust a centralized organization to manage funds and execute effectively.

Both DeFi and CeFi deliver a wide range of cryptocurrency-related financial services, like lending, borrowing, exchanging and more. 

Though there are overlaps, here are some of the key features and functionalities of both ecosystems that differentiate them from each other:

### Features of CeFi

1. Centralized exchange
2. Flexibility of fiat conversion
3. Cross-chain services

### Features of DeFi

1. Permissionless
2. Trustless
3. Quick innovation

## Summary of DeFi vs CeFi

<figure><img src="/files/JBf22n0ijfp6kIX3f3pK" alt=""><figcaption><p>Source: <a href="https://www.leewayhertz.com/defi-vs-cefi/#:~:text=With%20DeFi%2C%20users%20trust%20that,and%20execute%20the%20business&#x27;s%20services.">https://www.leewayhertz.com/defi-vs-cefi/#:~:text=With%20DeFi%2C%20users%20trust%20that,and%20execute%20the%20business's%20services.</a></p></figcaption></figure>

<details>

<summary>Sources</summary>

<https://www.leewayhertz.com/defi-vs-cefi>

</details>


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