Centralization VS Decentralization: The Role of CeDeFi

Lesson 1: Centralization VS Decentralization

Centralization and decentralization are two large talking points when it comes to anything-crypto. Both of these concepts are sometimes shrouded in mystery, and made out to be far more difficult to comprehend than they actually should be!

Centralization simply refers to something that has a single, central point of authority. So, a traditional company is going to be centralized, because it will have a CEO, or other forms of management that are going to make the executive decisions regarding important matters related to the company’s business model.

On the flip side, decentralization is the opposite of that - it’s when there’s no single authority, and thus, the decisions are made not by an individual person or a select group of people, but instead, by the entire community behind a project. In the earlier company example, this would equate to all of the employees within the company having a say in the direction that the business model should take.

When debating the pros & cons of centralization and decentralization in crypto, cryptocurrency exchange platforms are usually the go-to example to give. Centralized exchanges are usually very user-friendly, and come equipped with a wide array of features. However, many would argue that their centralized model is a security hindrance, by default, and that you don’t actually *own* your crypto assets, if you keep them on a centralized exchange (since the platform could freeze your wallet, at any point in time).

On the other hand, decentralized exchanges tackle these issues by allowing you to have full custody of your funds, at all times. While this is great, it doesn’t mean that DEXs don’t have issues of their own - specifically, a decentralized crypto exchange will usually fall far behind a centralized one when it comes to asset liquidity, as well as simply being more difficult and confusing to use, especially if you’re a beginner trader or investor.

There is, however, a third alternative to these concepts - something that’s often referred to as CeDeFi, or Centralized Decentralized Finance. In essence, projects that employ this model aim to combine the earlier-mentioned benefits of DeFi and CeFi, as well as solve (or, eliminate) most of the shortcomings that come with them, as well. One such project is called Changex.