A hybrid of CeFi and DeFi is more sustainable

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A hybrid of CeFi and DeFi is more sustainable

CeDeFi: The transparency offered by decentralized platforms is something CeFi can benefit from adopting. The solution could be to merge them into CeDeFi, says Lakov LevinCEO of Midas.Investments.

Despite the prolonged market downturn, the rate of crypto and blockchain adoption continues to grow in the industry. To date, more than 300 million people own and use cryptocurrencies globally. Over 18,000 businesses accept crypto payments for their products or services.

The profitability of crypto is seen as one of the driving factors for mass adoption. Today users realize that HODLing coins is just one strategy – but not by far the most profitable. To grow their digital wealth more substantially, they can lend their assets, borrow funds against crypto collateral, stake tokens, or participate in yield farming.

Yield is the main driver of the crypto economy. It helps users maintain financial stability even during a bear market. However, there are critical flaws in current asset management models in yield farming.

To better understand these problems and find a solution, we must first compare CeFi and Challenge yields.

Yields in CeFi and Challenge: advantages and disadvantages

Two types of platforms offer crypto yield services: CeFi (centralized finance) and DeFi (decentralized finance).

Security vs flexibility and volatility

Generally, CeFi is safer and more reliable, while DeFi offers a chance for higher profits while having high risk and volatility.

When one stakes one’s crypto on such CeFi platforms, it is lent to individual borrowers with fixed repayment rates. This 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 (non-fixed rates), which can change depending on the size of the liquidity pool or the token issuance rate.

Risk assessment

To better understand the risks of DeFi, consider the following scenario. As a platform grows in popularity, more and more lenders flock to it for higher returns (better rewards). Thus, the amount of liquidity in the liquidity pools will increase and, as a result, the rewards will drop.

This will not happen on a CeFi platform, where interest rates are fixed. The platform can maintain the latter by sacrificing its capital or by limiting the amount of deposit for lenders.

Add to that the overall complexity and volatility of DeFi, and it becomes clear why onboarding new users for decentralized finance is proving more difficult.

Nevertheless, some drawbacks of the current CeFi model indicate that an upgrade is long overdue – and we will examine them in the paragraphs below.

Central finance returns need a restart

In the current model, CeFi platforms are forced to spread their capital among different types of assets to maintain a fixed interest rate. This includes various DeFi protocols, liquid assets (stablecoins) and long-term crypto-institutional loans (3AC). However, if a black swan event occurs on some of these asset classes, the centralized platforms risk losing a large portion of their capital and putting users’ funds and their wallets at risk.

On top of that, there is the issue of trust. By using a centralized platform, you ultimately entrust your assets to a third party, who retains full control over them. On a DeFi platform, you are the only one in control of your private keys and wallets.

Indeed, CeFi offers many opportunities for sustainable investments in the world of crypto. Its fixed-rate, high-interest model can help users earn premium yield, which would not be possible with DeFi, and maintain financial stability.

However, the issues mentioned above can pose significant risks to your assets. The transparency offered by decentralized platforms is something CeFi can benefit from adopting. I think the solution is to take the best of both words – and merge them into CeDeFi.

CeDefi

CeDeFi: Mass Crypto Adoption Through Innovation

Combined, the CeFi and DeFi models can create more exciting reach for users and, at the same time, minimize risk.

CeDeFi bridges the gap between centralized and decentralized models. By adopting the latter’s transparency, it allows users to know how their assets are managed, while keeping them informed of the associated risks and benefits.

Midas Investments is a great example of how this model can generate exceptional returns. The platform relies on flexible CeDeFi strategies adapted to different market conditions to offer higher interest rates to its users while maintaining full transparency of investments and risks.

The platform uses DeFi and algorithms as building blocks to keep investment strategies transparent and make viable risk projections. A CeFi layer is added to this foundation to keep the traditional lending and borrowing model intact.

To better understand this hybrid model, let’s look at how Midas effectively uses CeDeFi strategies.

CeDeFi: investment strategies reinvented

Midas offers a wide range of transparent strategies to achieve superior performance. The first is staking a single asset. With this strategy, investors can earn higher returns on capital-intensive assets like BTC and ETH. They can potentially earn up to 12.8% APY on these assets while the project team manages and controls risk.

The proprietary Yield Automated Portfolio (YAP) strategy comprises a group (or pool) of equally weighted digital assets. It is similar to ETFs (Exchange Traded Funds) provided on the stock market. Investing in YAPs allows users to diversify their investments across multiple crypto assets, thereby minimizing risk.

CeDeFi investment strategies are a hybrid model designed for specific market cycles, allowing investors to choose the strategy that is closest to their investment philosophy. The CeDeFi model will act as a bridge between CeFi and DeFi, enabling account creation and fund management for investors participating in DeFi. Each of these strategies offers attractive investment returns while demonstrating resilience through different market cycles – bullish or bearish.

CeDeFi: Summary

CeDeFi has the potential to change the crypto industry, address some of the most pressing issues, and drive mass adoption of digital assets. The controlled yet transparent model can allow platforms to generate more sustainable passive income for the crypto community. Additionally, CeDeFi is attractive to institutional investors due to its security and scalability focus. It offers a robust solution to bring more security and control to the DeFi product suite.

In the future, users who want to make money from crypto will have the opportunity to mitigate risk by using CeDefi solutions that will generate returns through DeFi hedging strategies. As a result, CeDeFi is growing due to greater accessibility and seamless deployment. Thus, investors gain access to opportunities that generate APY by investing in hand-picked products and services that best meet their objectives.

About the Author

Lakov Levin is the CEO of 0f Midas.Investments, a CeDeFi platform for staking commodity crypto assets and DeFi tokens. Since 2018, Midas.Investments has grown from a Discord server to a CeFi and DeFi bridge for long-term wealth generation with $200 million under management and 7,000 active investors.

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Disclaimer

All information contained on our website is published in good faith and for general information purposes only. Any action the reader takes on the information found on our website is strictly at their own risk.

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