Having learned in the previous article about the Metaverse and how it forms a parallel digital world that merges reality and the virtual, we return today to a fundamental pillar of the digital financial system: Centralized Finance (CeFi).
While the Metaverse promises to create a new economy within virtual worlds, CeFi remains the bridge connecting this economy with traditional financial institutions.
What is Centralized Finance (CeFi)?
Centralized finance is the system managed by centralized platforms such as Binance, Coinbase, Kraken, where an intermediary party manages trading, custody, and lending operations.
This means that the user does not retain full control over their assets, but instead places their trust in a managed institution.
The technical aspect
Asset custody: Managed through centralized wallets operated by the company.
Security: Dependence on strong protection protocols, but the risk remains if the platform collapses.
Compliance: Most CeFi platforms are subject to KYC and AML regulations to ensure transparency and combat financial crimes.
The social and economic aspect
Ease of access: The majority of beginners start through CeFi due to its ease compared to DeFi.
Institutional trust: The presence of major companies reassures users, but at the same time imposes restrictions on them.
Impact of crises: The collapse of platforms like FTX showed how the downfall of a single institution can shake the entire market.
CeFi and the Metaverse
As the Metaverse economy expands, centralized finance will be the first gateway for new users to purchase digital assets such as NFTs or currencies used within virtual worlds. However, over time, reliance on decentralized finance (DeFi) may increase to achieve complete freedom and autonomy.
Conclusion
Centralized finance is the first step for many entering the crypto world, and a bridge connecting the virtual economy (the Metaverse) with the traditional economy.
But the question remains:
> Will CeFi be able to maintain its position against the rapid expansion of DeFi and the upcoming decentralized worlds?
🔜 Stay tuned for the next article
We will take you on a journey into the world of artificial intelligence and blockchain, where technological innovation meets the digital economy to create unprecedented new opportunities.
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