Centralized finance or CeFi is a blanket term referring to the traditional financial services surrounding cryptocurrencies. The term became popular compared with decentralized finance (DeFi), which turned into a revolution in 2020 and 2021.
CeFi includes centralized exchanges that process and handle all crypto trade orders, allowing users to get loans or earn interest on their crypto holdings via lending or borrowing. Centralized finance does offer faster transaction processing capabilities than traditional financial services but is criticized for being more opaque than DeFi.
On the plus side, however, CeFi offers higher security as it insists on stringent KYC and other compliance among users, bringing greater accountability into the system than decentralized finance has to offer.
