The cryptocurrency market has seen an upsurge in recent years. While Bitcoin is still the most popular cryptocurrency, there are many other new coins emerging on the market. There is a lot of speculation that these cryptocurrencies will soon become mainstream and replace current payment methods.
As it stands, the crypto ecosystem is divided into Centralized Finance (CeFi) and Decentralized Finance (DeFi).
CeFi refers to crypto companies that provide trading, staking, lending and borrowing services within a centralized platform. On the other hand, Decentralized finance (DeFi) is a new class of decentralized peer-to-peer lending applications that allow people to lend and borrow money without a middleman.
DeFi applications are considered decentralized because they do not have a single centralized authority or node that controls the movement of funds. Transactions are governed by smart contracts, which means the system is resistant to censorship. In recent years, this upcoming market has given CeFi a hard time.
Centralized financing (CeFi)
Centralized financial services is a paradigm that was introduced in the 1980s. It is also called a central bank. The central bank aims to maintain a stable monetary policy and to regulate the country’s currency. It also plays a role in the regulation and control of credit flows within the economy, usually through interest rates or reserve requirements.
The central bank provides all of these services with the help of commercial banks. This is done by providing liquidity when needed and can be thought of as similar to how a brain coordinates all of the other organs in your body to work together for your overall health and well-being.
Centralized crypto services work the same as traditional finance, as a single entity controls the options. Some of the centralized crypto service providers include exchanges such as Cryto.com. This platform offers crypto users a way to trade digital assets like Bitcoin and Ether, among others.
Notably, centralized crypto platforms offer additional services that are not available in traditional finance. Crypto users can increase their income by betting on an exchange like crypto.com. In doing so, they actively contribute to the growth and sustainability of the crypto ecosystem.
As staking returns on CeFi platforms are more lucrative than interest rates offered by traditional banks, it is gradually becoming clear that crypto players prefer decentralized platforms.
The era of decentralized financial markets
Decentralized financial markets are gaining momentum as blockchain technology continues to mature, with the price of cryptocurrencies like Bitcoin and Ethereum increasing exponentially in recent years. The 2008 global financial crisis made investors even more wary of traditional centralized markets that governments or banks can heavily manipulate.
This is where decentralized markets come in. Unlike centralized architectures, DeFi uses blockchain technology, which allows for more transparency and regulation while being insured against fraud or hacking attacks. This leaves fewer opportunities for governments or large institutions to manipulate prices for their benefit.
So far, the DeFi market has evolved to offer a wide range of decentralized financial services, including trading, asset management, payments, loans, and derivatives. This last category is accessible on DeFi protocols such as Premium financing, a next-generation DeFi platform that allows users to create customizable buy and sell options.
There are also upcoming DeFi projects whose main goal is to create an ecosystem where users can contribute to social impact initiatives. One of the players in this area is the Popcorn network, a DeFi protocol designed to fund organizations with a social impact.
With Popcorn network, DeFi users can stake their crypto assets to generate competitive returns based on the strategies presented. Essentially, this project inspires DeFi users to start doing good by allocating their feedback to social impact initiatives that support education, the environment, and open source innovations.
Unlike most existing DeFi protocols, the Popcorn Network sets itself apart by creating a decentralized, non-profit project where POP token holders have a say in governance and fund allocation. Ideally, token holders can nominate or elect organizations that have social impact and choose to allocate grants for their initiatives.
Popcorn’s network value proposition is a way to scale DeFi into a bigger niche. Similar to corporate social responsibility (CSR) in traditional finance, Popcorn creates a way to give back to society.
As the world moves towards the adoption of digital ecosystems, a lot is set to change. This development can be seen with the advent of cryptocurrencies like Bitcoin, changing the way people think about money. Before Bitcoin’s early days, most people were obsessed with the idea that savings should be managed from a central point. However, that fixation has changed as more and more people realize the value proposition of decentralized architectures.
That said, decentralized finance is here, and the future of money is digital. This new decentralized financial marketplace has evolved to offer many services such as loans, portfolio management, banking services, etc.
The future of money looks bright with the emergence of blockchain. Instead of relying on a centralized bank to store your money in an account, people can now store their funds in a wallet that they own and control themselves.
Not only do cryptocurrencies offer security for your money, but they also offer convenience as they allow people to transact anywhere in the world. And unlike other currencies, cryptocurrency exists without relying on the backing of a government or central bank (the US government still backs the USD).