CeFi (Centralized Finance)
Financial services in the cryptocurrency space that are provided by centralized companies, operating as intermediaries between users. CeFi platforms offer services similar to DeFi — lending, borrowing, trading, yield — but with a centralized entity managing funds and operations. CeFi offers convenience but introduces counterparty risk.
“BlockFi and Celsius were CeFi lending platforms that offered high yields on crypto deposits. Both filed for bankruptcy in 2022, highlighting the counterparty risk of trusting centralized entities with custody.”
DeFi (Decentralized Finance)
An ecosystem of financial services built on blockchain networks that operate without traditional intermediaries like banks, brokerages, or insurance companies. DeFi uses smart contracts to provide lending, borrowing, trading, insurance, derivatives, and yield generation in a permissionless, transparent, and composable manner. Anyone with a wallet can participate.
CEX (Centralized Exchange)
A cryptocurrency exchange operated by a centralized company that acts as an intermediary between buyers and sellers. CEXs hold custody of user funds, maintain off-chain order books, and typically require identity verification (KYC). They offer high liquidity and ease of use but introduce counterparty risk.
Exchange
A platform where users can buy, sell, and trade cryptocurrencies. Centralized exchanges (CEX) are operated by companies that custody user funds and match orders, while decentralized exchanges (DEX) operate via smart contracts, allowing users to trade directly from their wallets.