Whether you are looking for cryptocurrency-related financial services or something far more specific, understanding the DeFi vs CeFi argument is important to choosing the right option.

Centralized and decentralized exchanges are both valid ways of trading crypto assets, but they are different enough to make the distinction important.

What are Centralized Finance (CeFi) Services?

Centralized financial services are the traditional financial services for most purposes. These rely on central exchanges that are part of the global financial system, with most CeFi service providers being part of the larger financial industry or centralized companies.

CeFi services come from centralized entities that have complete control over the platform. This single centralized entity - whether that is a company or a government financial institution - is the authority of that platform and has the final say on the rules of that centralized exchange space.

Centralized finance (CeFi) markets are like an online bank. The financial system allows you to access services like asset storage, often from anywhere in the world (as long as you have an internet connection), but you still fall under a central exchange run by a central authority.

What are Decentralized Finance (DeFi) Services?

Decentralized finance (DeFi) services do not have centralized exchanges and are not normally connected to global markets in the same way.

Without centralized exchanges, most use independent blockchain platforms that are automated and self-governed, allowing anybody to participate.

The end goal of most decentralized finance systems is to create open-source, transparent, permissionless, easy-to-access banking services - full financial freedom.

However, this also means that certain benefits of traditional financial products and services can't apply to DeFi platforms.

Not having financial institutions involved limits the kind of robust financial system that DeFi services perform but also breaks away from the limitations of relying on a central exchange.

Many people turn to a DeFi ecosystem for this exact reason, getting more freedom with their own money and digital assets.

What are the differences?

The difference between centralized finance and decentralized finance options is quite dramatic, and many people do not realise just how significant the changes can be until they swap from one to the other.

Whichever platform you use, it is important to understand the features of the other one so that you are not ignoring a potentially better option.

DeFi Features

Decentralized finance platforms are heavily focused on freedom and lack of third-party oversight.  The DeFi world is all about direct access on your own terms, and DeFi users aim to minimize how much information they are giving away when using the platforms.

Trustless Services

DeFi does not rely on any kind of trust system because it is barely ever needed. DeFi systems are built to be automated and code-based, often using blockchain systems that are impenetrable to third-party hacking or modification.

This means that you can use most DeFi services with an immediate understanding that it will work as expected. External tools can help you double-check if you are concerned, but the average DeFi platform will work from the moment you make your first trade or transaction.


DeFi projects are disconnected from traditional markets in many ways, meaning that they can innovate on their own terms. This means that many DeFi platforms can emulate features on a CeFi exchange while still functioning as fully decentralized applications.

A good DeFi platform can have a significant advantage in feature improvements since the only thing that developers need to worry about is the platform's crypto operations.

As long as something does not disrupt crypto trading, there can be all kinds of tweaks and improvements made to the core of the platform itself.


Unlike a centralized exchange, DeFi services are permissionless. This means that almost anybody can gain access to the basic services of the platform and use them without barriers, discrimination, annoying sign-up fees, or tiered paid access options. If you want to access DeFi services, you can usually just do it.

The advantage of this should be obvious. New traders and users can join and use the DeFi protocols whenever they like and do not have to get around financial institutions and artificial limits that are meant to keep out specific groups of people.


While true anonymity is incredibly rare on the internet, the DeFi vs CeFi debate inevitably turns to that detail eventually.

Decentralized finance allows for financial transactions without plastering your name across all of the financial products and services you use, making DeFi markets more common for people who value privacy and hate leaving a digital footprint.

This will not always be the case - some platforms may have an internal account system of some kind.

Even so, DeFi can be a great choice for entering the crypto space without giving away too much personal information on a whim.

CeFi Features

Centralized exchanges are the default option when dealing with fiat currency, and this often applies to cryptocurrency too.

While decentralized exchanges might offer more freedom in general, they also have limitations that can only be surpassed with the help of a central authority.

Fiat Conversion

One of the key differences between DeFi and CeFi is the way they handle fiat currencies. In CeFi markets, fiat currency is frequently traded as part of overall cryptocurrency trading, whereas DeFi can't handle fiat currency (or fiat currency conversions).

Being able to use fiat currencies properly is also really important for first-time or novice traders. Even as a long-time expert, it never hurts to have the option to outright buy crypto using your own finances, especially if you want to take advantage of a sudden price drop.


While DeFi might be more freeform, CeFi's connections make it a bit better for people without as much experience or stake in the world of online trading. Being able to step aside and withdraw your crypto assets as fiat currencies is always a good safety option.

It is important to consider the fact that CeFi is connected to the global economy, even through the simple act of supporting fiat currencies.

A centralized finance exchange is not focused on freedom but on functionality and cross-connectivity with other parts of the market or financial system.

This often means that a centralized exchange is better for handling traditional financial services.

When comparing DeFi and CeFi, it is easy to see DeFi as a more specific tool compared to CeFi's generalist approach to finance, which is far from a bad thing.

Cross-Chain Services

Centralized finance platforms have the advantage of all being connected to the same overall system, which means more chances for cross-chain services or integration between platforms. Performing cross-chain swaps is only really possible on CeFi exchanges and platforms since they are all connected to a centralized economy.

This can be incredibly important since many of the best crypto coins exist on multiple blockchains that are not directly related to one another.

Without this connectivity, it becomes incredibly hard to properly trade all kinds of crypto with any other kind, and certain trades would simply be impossible to do at a technical level.

Are Centralized Exchanges Better?

One of the biggest questions that gets asked regarding DeFi vs CeFi is which option works best. The thing is, CeFi and DeFi projects are inherently different, and they are mostly meant for completely different things - even if they share some similar features.


Centralized finance platforms tend to have faster and more consistent transactions, as well as more transaction options.

This makes them better for all kinds of day-to-day payment and trade purposes, especially for people who are brand new to crypto or other digital currencies.

Decentralized finance platforms are the opposite, offering lower fees and basically no restrictions or regulations - but at the cost of connectivity.

This makes it a very barebones option, which can be a good thing in many circumstances, but it also requires some practice and a deeper understanding of how trades actually work.


Centralized platforms are vulnerable to attack, but many make sure that they are using effective security measures to keep third parties out. This also includes things like anti-money-laundering checks and proper protection against a shady smart contract arrangement.

Decentralized platforms have fewer restrictions and regulations, but they are also much safer in terms of general security.

Since they do not have a central platform hosting all of the important data, various security attacks simply will not work against the system since there is not anything to attack.

As a sidenote, DeFi systems based on a blockchain are going to be almost impervious to attack. They can use consensus to keep "repairing" themselves if part of the systems suffers any unexpected changes or damage, making them a much safer choice if faced with a direct malicious attack.


Many people attempt to maximize their margin trading returns through yield farming - using crypto lending on DeFi platforms to get a head-start. This can be a powerful cryptocurrency market technique, but it can also be incredibly risky.

CeFi platforms are a bit less risky but also come with fewer options since you are dealing with the restrictions laid down by the platform owner.

Liquidity providers can make a good profit using smart contracts, and a careful user can turn quite a high profit, so neither option is necessarily better than the other here.

Should you choose decentralized exchange or centralized exchange platforms?

The platform you should use depends on your needs and expectations. Both DeFi and CeFi are powerful ways to earn money or trade crypto, and neither completely overshadows the other.

They even share some features, such as private keys. A private key is important in DeFi, but it can also be part of CeFi, and two platforms may handle them in slightly different ways instead of using the exact same system.

What do I choose?

Whether you are a small business owner fresh out of a financial crisis that is looking into margin trading, representing some liquidity providers handling smart contracts or just a regular person with an interest in crypto, there are a lot of platforms to choose from.

Advanced features and techniques like smart contracts will always come into play in these situations. Using a smart contract on one platform may not be necessary for another, and individual platforms deploy projects and updates at their own pace. The question is not which type of platform you should use, but which specific platform you should use.

Which is best?

While there are distinct differences between decentralized and centralized finance platforms, remember that the most important part is your own needs and goals. Choosing a platform that aligns with your trading habits is always the best option, especially if you are new to trading and have no idea what you should be choosing.