Generally, when people hear the term 'crypto', they associate it with the speculative buying and selling of digital coins for a profit. Even though people have mainly used crypto assets for trading and investing, the technology behind it is positioned to disrupt the legacy financial systems we currently use today.

In the crypto asset market, there are two main ways for people to gain access to crypto assets. One is through a centralised platform, and the other is through a decentralised platform - but what is the difference between centralised finance (CeFi) and decentralised finance (DeFi), and how should an investor determine which to choose?

What is CeFi?

CeFi represents the companies that offer crypto asset financial services in a safe and secure way. In comparison to DeFi, CeFi offers a more intuitive and easy-to-use experience due to its centralised nature. CeFi companies are more likely to be regulated and required to follow similar rules to that of banks and other financial institutions.

CeFi takes the best benefits of DeFi, such as high yield on crypto assets, and finds a safe and simple way to offer this to their clients. 

What is DeFi?

One of the biggest drivers behind the growth of blockchain technology is the concept of decentralised finance, or DeFi for short. Ultimately, a DeFi transaction is a financial transaction that bypasses financial intermediaries.

Unlike using a bank, where your payment takes days to arrive and possibly paying +5.00% per transaction, DeFi transactions are instant and cost only a few cents. Among other things, DeFi is revolutionising the way we view our finances.

Blockchain technology allows people to gain access to all the benefits that banks offer without ever having to deal with them directly and paying exorbitant fees.

Should I use a CeFi or DeFi platform to gain exposure to crypto assets?

When attempting to gain exposure to crypto assets, investors need to weigh up the advantages and disadvantages of both options. An overview of each is provided in the following table.

‍

One of the biggest differences between CeFi and DeFi is the fact that when using DeFi platforms, you house your crypto assets in your own wallet. While this is an advantage in terms of self-custody, it can be very detrimental if you were to forget your password or lose your hard wallet. Without recourse to a centralised party, recovering your crypto assets would be virtually impossible. It is because of this that many people don’t like having that responsibility and prefer the security of a centralised intermediary.

How can you tell which exchange/broker is more suited for you? 

Several instances have been reported where funds sitting on CeFi and DeFi platforms have disappeared and left their customers in a state of panic and fear. Therefore, it is crucial that you vet the exchange yourself before investing. The same applies to any investment platform, not just crypto.

Before choosing an exchange, you should ask yourself and be able to answer the following questions:

• Does the exchange offer products that meet your needs?
• Is the exchange liquid enough?
• What are the risks involved when using the exchange?
• Does the exchange have a good reputation?
• Has the exchange been audited?

At Altify, we take nothing more seriously than the security of customer funds and being fully transparent with each customer. Altify uses best-in-class firewall architecture, military-grade AES-256 encryption, multi-signature encrypted wallets, and multi-party computation (MPC) technology to protect clients' assets at all times. 

Altify prides itself on its transparency, becoming Africa's first crypto investment platform to perform quarterly independent audits of its reserve assets. Mazars, a leading international audit, tax, and advisory firm, conducts the quarterly proof-of-reserves audit on Altify to ensure your funds and assets are properly managed and accounted for.

Altify offers its customers a unique product suite allowing you to gain exposure to a range of single crypto assets, including Bitcoin, Avalanche, Polkadot and more. Along with these single assets, Altify offers its signature crypto Bundles, which are like thematic ETFs that give you quick and easy exposure to the most prominent sectors within the crypto asset market. Additionally, investors can gain exposure to dollar-based savings by using the Altify USD Savings Vault.

Join Altify here today and take your first step in becoming your own wealth manager.