CeFi – A Complete Guide
CeFi has been referred to as the traditional financial system for many years, and it has been the primary way for people to access financial services. Let’s see how it works.
What’s CeFi?
CeFi is centralized and operated by a single entity or organization. It is a traditional financial system that is similar to the banking system, where a centralized authority of origin of the country provides the financial services.
How does this CeFi work?
The workflow of CeFi involves a centralized authority or entity that provides financial services to its customers. Here are the basic steps in the workflow of CeFi:
Step 1: Onboarding customers by registering and verifying the identity via the customer’s details & documentation of an entity to open an account.
Step 2: Once the customer is onboarded, the next step is to deposit funds into the account. The customer can deposit funds through various methods, such as bank transfer, credit card, or other payment methods based on preferences.
Step 3: After the funds are deposited, the customer can manage their account through the entity’s platform like web & mobile apps to view their account balance, transaction history, mortgage calculations, and various financial services to its customers, such as loans, credit cards, savings accounts, and investment products. The customer can access these services through the entity’s platform.
Step 4: Finally it’s time to fund withdrawal in the overall process of CeFi. The customer can withdraw their funds from the account through various methods, such as bank transfer or other payment methods.
Overall, the workflow of CeFi involves a centralized authority or entity that provides financial services to its customers. The entity manages the funds and provides the necessary services to the customers. The customers have to trust the centralized entity to manage their funds and provide the necessary services.
However, with the advent of blockchain technology, a new financial system has emerged, called Decentralized Finance (DeFi). Many financial services implement blockchain technologies along with their fintech services. DeFi is a decentralized financial system, meaning that it is not controlled by any single entity as it runs on a blockchain network, where the financial transactions are managed by a network of computers. The users have full control over their funds, and they can access financial services without the need for a centralized authority like bank approval or fintech approval.
In conclusion, both CeFi and DeFi have pros and cons, and it is up to the users to decide which one is best for them but aren’t sure to choose the traditional or advent blockchain technologies. No worries reach BSEtec – a leading blockchain development company that provides free consultation in blockchain.
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