It is impossible not to notice the raging confrontation between traditional and digital financial systems. While the well-established centralized system seeks to maintain control over money circulation, decentralized finance dictates new rules and allows users to remove these ties. But what if we take the best of both worlds and create something devoid of the shortcomings of its predecessors? This is the ultimate goal of CeDeFi.
- CeDeFi is a unique structure that merges the benefits of CeFi and DeFi.
- Like all existing systems, CeDeFi has its own advantages and disadvantages that affect crypto payments.
- NOWPayments allows business owners to accept crypto payments both to their wallet and merchant account.
What is CeDeFi?
Until recently, there were only two structures in the financial world: centralized and decentralized. CeFi is a traditional financial system that includes several central authorities, institutions, and intermediaries, which DeFi seeks to eliminate with the help of smart contracts and blockchain technology. It is obvious from the name that CeDeFi is a merger of two opposing financial systems and stands for centralized decentralized finance. CeDeFi combines the advantages of two financial systems: regulated by a single centralized structure (bank, state, and others) and an independent financial ecosystem that provides users with full control over their money. The purpose of CeDeFi is to provide basic DeFi services and products along with the security, cost-effectiveness, and flexibility of CeFi.
Thus, CeDeFi provides users with the entire list of DeFi services, such as cryptocurrency trading, yield farming, lending, staking, and more, while using the advantages of CeFi.
In addition, while DeFi services allow everyone to access financial tools without exception, CeDeFi tends to centralize to increase security and control and therefore comply with the regulations established by local authorities and apply KYC and AML.
What are the advantages and disadvantages of CeDeFi?
As already mentioned, CeDeFi combines the best of both worlds. But what does this merger bring us? Below we will look at what advantages and disadvantages CeDeFi has.
- As you know, CeFi, due to its well-established position, has better liquidity than DeFi. Thus, thanks to the merger of the two systems, CeDeFi users get access to cost-effective prices and fees, as well as better availability and processing speed.
- DeFi also brings greater financial freedom, allowing users of the new structure to make their crypto transactions without centralized intermediaries. Reducing the number of intermediaries also affects the transaction fees and transaction speed.
- Another advantage of CeDeFi that was gleaned from DeFi is high security. Since CeDeFi uses blockchain and smart contracts, it is more difficult for attackers to penetrate its network than in CeFi.
- In addition, this merger allows CeDeFi users to use fiat funds to make a purchase or sale, which was impossible within DeFi.
- It is also worth noting that within the framework of CeDeFi, business owners can easily integrate innovative solutions into their business (blockchain, cryptocurrencies, smart contracts, NFTs) and not worry about the legal part of the issue.
- Careful verification of projects and tokens within the framework of CeDeFi is also crucial, which has a positive effect on the security of transactions and investments.
- Moreover, in contrast to CeFi, the improved CeDeFi structure allows users to get more privacy, thanks to decentralization.
- The main disadvantage of CeDeFi is the lack of user trust. Those who sought to get rid of control and move into a free DeFi space believe that CeDeFi is a step back in the evolution of the financial system.
- Also, despite the fact that tokens and projects undergo verification procedures within CeDeFi, there is still a greater risk of running into a scam than in CeFi.
- Another disadvantage of CeDeFi is the return to centralization. Despite the use of smart contracts and a reduction in the number of intermediaries, most CeDeFi platforms are custodial, which significantly increases the risk of attacks.
How will CeDeFi change crypto payments?
Having considered everything that CeDeFi is, as well as analyzing all the advantages and disadvantages, we can draw several conclusions about how a hybrid of CeFi and DeFi can change crypto payments:
- Thanks to CeDeFi, crypto transactions will become more cost-effective, fast, and secure due to the reduction in the number of intermediaries and the use of smart contracts.
- In addition, if we recall the blockchain trilemma (scalability, decentralization, and security), we will understand that CeDeFi sacrifices decentralization for the benefit of scalability, which increases the speed of payment processing.
- CeDeFi brings regulatory compliance (KYC, AML, CFT procedures) to the world of cryptocurrencies, which increases the security of payments and allows business owners to conduct legal business.
- Thanks to CeDeFi, the crypto space attracts more institutional investors, which has a good effect on the mass adoption of cryptocurrencies and can lead to the growth of the crypto market.
- The use of smart contracts and blockchain technology increases the security and transparency of payments.
How can I accept crypto payments?
With NOWPayments, merchants can accept cost-effective and fast crypto payments in 100+ coins using a suitable integration tool:
- Plugins for CMS platforms such as WooCommerce, Magento 2, Zencart, OpenCart, and WHMCS allow online store owners to start accepting crypto payments.
- A lightweight API, thanks to which business owners can accept 100+ coins for payment on any platform, application, or website, as well as receive IPNs.
- Billing provides a convenient payment solution that allows you to charge your consumers with a fixed frequency. NOWPayments provides several state-of-the-art solutions. Our service can send payment reminders directly to your customers, or you can use our custodial solution and benefit from the automatic debiting of funds.
- PoS terminal is a crypto payment tool that allows brick-and-mortar merchants to accept crypto payments on the spot.
- Invoices are a convenient solution that facilitates the payment process and makes it more efficient. Thanks to the invoice, you can arrange all the information necessary for payment in a small box and send it as a link to your customers. To generate a link, you will need to follow these steps:
- Log in to your NOWPayments account or create a new one.
- Go to “Settings” >> “Payment settings”.
- Specify your address and generate an API key.
- Go to “Payment Tools ” >> “Payment Link”.
- Click “Create payment link”.
- Fill in the form and click “Confirm”.
- Save the link and send it to your customers.
Whether CeDeFi is a new round of evolution of the financial system or not, time will tell. Nevertheless, this merger allows us to bring the best of both opposing structures into the world of finance.