INSIGHTSCeFi, or Centralized Finance, describes a financial ecosystem where services such as trading, lending, and investing are managed by central authorities or organizations. Unlike DeFi (Decentralized Finance), which operates on a peer-to-peer basis with smart contracts on blockchains, CeFi platforms typically require users to trust a single institution to handle their funds and transactions. Some popular examples of CeFi platforms include cryptocurrency exchanges and lending platforms that facilitate trades and provide interest on deposits.
In practice, users create accounts with these centralized entities and must undergo Know Your Customer (KYC) verification, which often includes submitting identification and other personal information. These platforms generally offer user-friendly interfaces and customer support, making them accessible to a wide range of traders. However, this centralization means that the users' assets and access to their funds are ultimately dependent on the platform's security and regulatory frameworks. Related concepts include KYC, AML (Anti-Money Laundering), and custodial versus non-custodial wallets.