In the world of digital currencies, we often hear about central financing (CEFI) and decentralized financing (Defi), these two models represent two different directions for digital money management and investment in them and each of them has special advantages and challenges, and understanding the differences between them helps investors choose the most appropriate for them according to their needs and financial goals.
Central Finance (CEFI)
Central financing is the closer model to the traditional financial system but it is applied in the digital currency environment, and in this system the user depends on central platforms such as the Beans or Queen Pace to manage his money and make his transactions, and the platform maintains the keys of the digital portfolio and manages withdrawals and deposits and provides services such as immediate trading or loans, which distinguishes central financing is that it is more easy for beginners and provides technical support And organizational services create a sense of confidence, but in return put the investor at the mercy of the intermediary company, which makes him vulnerable to freezing balances or loss of money in the event of a penetration.
Decentralized financing (Defi)
The decentralized financing is the model that relies entirely on the technology of blockchain and smart contracts without the presence of a mediator, and all the operations are carried out directly between the parties across networks such as Etheerium where each user maintains his own switches and has full control of his money, and this model provides various services such as lending, borrowing, decentralized trading and digital agriculture, which distinguishes decentralized financing is absolute freedom and transparency High, however, the difficulty of use for beginners and the absence of legal regulation makes the risks greater, especially when exposed to breakthroughs or gaps in smart contracts.
The difference between CEFI and Defi
The primary difference between central and traumatic financing lies in the element of confidence, in CEFI the user puts his confidence in the company that runs the platform, while in Defi he puts his confidence in the technology and programming that carries out operations, central financing is more simple and relatively secure while decentralized financing gives more freedom but requires a deep experience and understanding of risks.
The future of digital financing
It is expected that the model will continue to develop side by side, as the central financing attracts the category of beginners and searches for safety, while the decentralized financing those wishing to independence will be desired, and we may witness a mixture between the two in what is known as hybrid financing that seeks to combine simplicity and freedom.
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