Can CeDeFi Be Successful?

by Jurica Dujmovic
By Jurica Dujmovic

Can centralized finance and decentralized finance join forces to utilize the benefits of both systems?

Midas Investments (MIDAS, Unrated) — an investment firm specializing in DeFi yields — is about to find out.

The company recently announced it will be shutting down its platform due to significant losses and a withdrawal of 60% of its assets.

Midas plans to pivot to a new project focused on CeDeFi, or centralized DeFi, which aims to bridge the gap between traditional CeFi and DeFi by connecting competing protocols with liquidity and offering a streamlined yield experience for both centralized and decentralized audiences.

The shutdown of Midas raises questions about the future of CeFi and DeFi, and the potential of CeDeFi as a hybrid solution.

Is CeDeFi the best of both worlds … or something else entirely?

To find the answer to this burning question, I’ve had the opportunity to talk to Eric Chen, CEO and cofounder of Injective Labs (INJ, Tech/Adoption Grade “C”), which is the core contributor to injective blockchain. Injective is an open, interoperable network that uniquely provides solutions for DeFi developers.

Eric says, “The Midas shutdown is just the latest example of the ongoing contagion from events like FTX and Three Arrows Capital. While Midas shutting down may not have a significant impact on CeFi or DeFi as a whole, it does highlight the risks associated with using centralized platforms.

“CeFi platforms can hold users' assets and prevent them from withdrawing, as we have seen repeatedly. This contagion should serve as a cautionary tale for why users should be wary of investing with centralized platforms and instead consider decentralized alternatives, where ownership of assets remains with the user and there’s no risk of platform mismanagement leading to loss of funds.

“As CeFi continues to fail its users, it provides the reason why DeFi is still needed today.”

Eric continues, “In my opinion, CeDeFi is attempting to combine two inherently opposing systems. While it may be possible to blend elements of both, I have not seen a successful implementation of CeDeFi to date.

“As users become more educated on the differences between CeFi and DeFi, they will be more inclined to choose decentralized options that offer greater security and stability. In my view, DeFi gives users control over their own assets, eliminates the risk of platform mismanagement and is the best path forward for the future of finance."

So, there you have it.

The shutdown of Midas Investments and its pivot to CeDeFi raises important questions about the future of traditional finance, DeFi and the potential for hybrid solutions.

While CeDeFi may offer some benefits, it has yet to be proven as a successful model. As we continue to see the risks and failures of centralized platforms, it becomes clear that decentralized alternatives offer greater security and stability for users.

It will be interesting to see how the market evolves and whether CeDeFi can make a difference in salvaging the reputation and ruined public trust of CeFi platforms.

Best,

Jurica

About the Contributor

Jurica Dujmović has been a creator, collector and investor in digital art, including the rapidly evolving non-fungible tokens (NFT) space since its inception nearly a decade ago. He’s also passionate about digital currencies and writes about crypto trends, including what’s new in the Weiss Crypto Ratings, in Weiss Crypto Daily. 

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