CeDeFi: The transparency that decentralized platforms offer is something that CeFi can benefit from. The solution could be to merge them into CeDeFi, says Lakov Levin, CEO of Midas.Investments.
Despite the ongoing market decline, the rate of crypto and blockchain adoption continues to grow across the industry. To date, more than 300 million people worldwide own and use cryptocurrencies. Over 18,000 companies accept crypto payments for their products or services.
Crypto profitability is considered to be one of the enabling factors for mass adoption. Today, users are realizing that coin HODLing is just one strategy — but far from the most profitable. To significantly increase their digital wealth, they can lend their wealth, borrow funds against crypto collateral, stake tokens, or engage in yield farming.
Yield is the core driver of the crypto economy. It helps users maintain financial stability even during a bear market. However, the current asset management models in yield farming have critical shortcomings.
To better understand these issues and find a solution, we first need to compare CeFi and DeFi returns.
Yields in CeFi and DeFi: Pros and Cons
Two types of platforms offer crypto yield services: CeFi (centralized finance) and DeFi (decentralized finance).
Safety vs. flexibility and volatility
As a rule of thumb, CeFi is safer and more reliable, while DeFi offers the chance to generate higher profits while at the same time presenting high risks and volatility.
Putting your cryptos on such CeFi platforms lends them out to individual borrowers with fixed repayment rates. It creates a good financial cycle, which in turn contributes to the stability of the model. DeFi platforms, on the other hand, mostly use floating rates (not fixed rates) that can change depending on the size of the liquidity pool or the token issuance rate.
assess risks
To better understand the risks of DeFi, consider the following scenario. As a platform gains popularity, more and more lenders rush to it for higher returns (better rewards). So, the amount of liquidity in liquidity pools will skyrocket and rewards will decrease as a result.
This will not happen on a CeFi platform where interest rates are fixed. The platform can maintain the latter by sacrificing its capital or capping the deposit amount for lenders.
Add to this the overall complexity and volatility of DeFi, and it becomes clear why onboarding new users for decentralized finance is proving more difficult.
Still, certain downsides of the current CeFi model suggest it’s long overdue for an upgrade – and we’ll review those in the following paragraphs.
Centralized financial returns that need a reboot
In the current model, CeFi platforms are forced to spread their capital across different investment types in order to maintain a fixed interest rate. These include various DeFi protocols, liquid assets (stablecoins) and long-term crypto-institutional loans (3AC). However, if a black swan event occurs for some of these asset classes, centralized platforms risk losing a large chunk of their capital, putting user funds and their portfolios at risk.
There is also the question of trust. With a centralized platform, you ultimately entrust your assets to a third party who retains full control over them. On a DeFi platform, only you are in control of your private keys and wallets.
In fact, CeFi offers numerous opportunities for sustainable investments in the crypto world. Its fixed and high-yield model can help users earn premium returns that would not be possible with DeFi and maintain financial stability.
However, the above issues can pose significant risks to your assets. The transparency that decentralized platforms offer is something CeFi can benefit from. I believe the solution is to take the best of the two words – and merge them into CeDeFi.
CeDeFi: Mass Adoption of Crypto Through Innovation
Combined, CeFi and DeFi models can create more exciting scope for users while minimizing risks.
CeDeFi bridges the gap between centralized and decentralized models. By inheriting the transparency of the latter, it lets users know how their wealth is being managed while keeping them informed about the risks and benefits involved.
Midas Investments is a prime example of how this model can generate exceptional returns. The platform uses flexible CeDeFi strategies adapted to different market conditions to offer its users higher interest rates while ensuring full transparency on investments and risks.
The platform uses DeFi and algorithms as fundamental building blocks to keep investment strategies transparent and create actionable risk forecasts. On top of this sits a CeFi layer to keep the traditional model of lending and borrowing intact.
To better understand this hybrid model, let’s look at how Midas uses CeDeFi strategies effectively.
CeDeFi: Investment strategies rethought
Midas offers a wide range of transparent strategies to achieve premium returns. The first is single asset staking. With this strategy, investors can earn higher returns on big-cap assets like BTC and ETH. You can potentially earn up to 12.8% APY on these assets while the project team manages and controls the risks.
The proprietary Yield Automated Portfolio (YAP) strategy involves a group (or pool) of equally weighted digital assets. It is similar to ETFs (Exchange Traded Funds) offered on the stock exchange. Investing in YAPs allows users to diversify their investments across multiple crypto assets, thereby minimizing risks.
CeDeFi investment strategies are a hybrid model designed for specific market cycles, allowing investors to choose the strategy that best suits their investment philosophy. The CeDeFi model will serve as a bridge between CeFi and DeFi, enabling account creation and fund management for investors participating in DeFi. Each of these strategies exhibits attractive ROIs while demonstrating resilience in different market cycles – bullish or bearish.
CeDeFi: Conclusion
CeDeFi has the potential to transform the crypto industry, solving some of its most pressing problems and driving mass adoption of digital assets. The controlled yet transparent model can allow platforms to generate more sustainable passive income for the crypto community. In addition, CeDeFi convinces institutional investors with its security and scalable orientation. It offers a robust solution to bring more security and control to the suite of DeFi products.
In the future, users looking to earn through crypto will have the opportunity to mitigate risks with CeDefi solutions that generate revenue by hedging DeFi strategies. As a result, CeDeFi is increasing due to better accessibility and seamless deployment. So, investors enjoy access to opportunities that APYs generate by investing in handpicked products and services that best meet their goals.
About the author
Lakov Levin is the CEO of Midas.Investments, a CeDeFi platform for staking core crypto assets and DeFi tokens. Since 2018, Midas.Investments has evolved from a Discord server to a bridge between CeFi and DeFi for long-term wealth generation, with $200 million in assets under management and 7,000 active investors.
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