Is it a match-up? coexistence? DeFi vs. CeFi

Can DeFi vs. CeFi Two Finance Coexist?

Zhu Su and Kyle Davies, co-founders of hedge fund Three Arrows Capital, acquired $400 million in Ether using the company’s assets in November 2021. They become two of the world’s top cryptocurrency holders.

After the fall of 3AC, Su and Davies go into hiding for eight months.

Three Arrows Cash, which had accepted huge loans from all of the major CeFi lenders, went insolvent after placing highly leveraged directional bets in the crypto bear market, possibly wiping out all of its investors’ capital.

Decentralized finance, or DeFi, has fared much better in terms of contagion and has continued to grow. However, the collapse of Terra and subsequent hacking have eroded investor trust, with losses totaling $678 million in the second quarter of 2022 alone.

The cryptocurrency bear market has caused the value of certain DeFi tokens to drop by more than 90% in a matter of months, while others have been totally wiped out. Even respectable “blue chip” projects like Aave, Uniswap, and Curve were unable to protect their tokens from the slaughter.

Immunefi, a bug bounty and security services platform, has handed out over $40 million in bounties to white hat hackers. It presently awards rewards for over 300 DeFi and crypto projects with a total user money of $100 billion.

Black hat hackers are abusing smart contracts on cross-chain bridges, and state-sponsored hacking organizations are also devoting significant resources to protocol theft. Immunefi and protocols have set bounties to encourage whitehat hackers to exploit protocols before payments are lost.

Aggarwal claims that DeFi is a completely trustless system, and that the Terra Luna meltdown demonstrated that IBC works as promised.

Aggarwal feels that the industry’s purpose is to allow for experimentation so that technology may develop over time.

Traditional finance and decentralized finance are likely to coexist in the future of finance. The focus must stay on decentralization, and the sector will see a fresh growth surge in the next year.

DeFi protocols give real-time information on relevant gains, losses, total value locked, token emissions, and project reserves, which might help with the notion of fractional collateralized deposits.

Custodians, like as SEBA Bank, assist institutional investors in acquiring exposure to DeFi yields by trading cryptocurrencies against fiat currencies.

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According to Marvin Bertin, partner and chief scientific officer of Genius Yield, decentralized financial systems are more inclusive.

Celsius’s originator said that the protocol provided high rates to depositors by using some of the greatest methods used by Wall Street to generate yield or extract value from money.

According to Bertin, DeFi enables anybody with an internet connection to access financial services, removing the customary hurdles to startup financing.

DeFi provides new and inventive ways to access money, and some protocols are even testing methods to prevent investment risk. Genius Yield, located in Zug, obtained its own seed capital via a Cardano community-based initial share pool sale.

According to Alexander of SEBA Bank, DeFi is more likely to be the victim of disastrous cyberattacks than CeFi, but it also provides other real advantages. Genius Yield argues that self-custody is the primary reason DeFi will outcompete CeFi.

Some individuals will opt to trust centralized organizations such as banks or exchanges, while others will trust themselves. Laurent Bellandi thinks that DeFi will become a big financial player.

The statistics seem to support this, with capital investment in the crypto industry exceeding the total value locked in DeFi protocols totaling $61.55 billion.

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