Cardano is one of the most decentralized networks in the cryptocurrency industry. This is extremely important as DeFi has the potential to solve the problems that TradFi and CeFi suffer from. Prominent CeFi companies have gone bankrupt and others may be facing a similar fate. Some are trying to blame the high volatility of cryptocurrencies and DeFi for the crashes. The reality is that DeFi can protect user assets better than any centralized entity. Satoshi’s vision is motivated by the desire to eliminate middlemen and rely on Peer-to-Peer services. Unfortunately, many users still do not understand the point of decentralization and entrust their cryptocurrencies to centralized third parties. This is somewhat understandable, as it is natural to try to use one’s own wealth to make a profit. It is important to distinguish well between custodial and non-custodial services. Let’s talk about why Defi can protect your assets better than CeFi and why to use the Cardano platform to build DeFi services.
TLDR:
- CeFi companies tries to look like modern companies that advocate decentralization but they are centralized entities taking advantage of the legal vacuum around cryptocurrencies.
- CeFi companies offer promising above-market yields. They are not afraid of utilizing massive leverage in DeFi services.
- Very high leverage, bad human judgment, a lack of transparency, and greed are the real causes of the CeFi problems.
- Rules of DeFi services are programmed through smart contracts that are inherently immutable. Triggering the execution of specific actions is driven by the market, not by the subjective decisions of individuals.
- There have been 13 hacks worth more than $1B in the last 3 months.
- There are time-tested DeFi services, but there are only a very few of them.
This article was prepared by Cardanians with support from Cexplorer.
Read the article: Why build DeFi on Cardano | Cardano Explorer