CeFi (Centralized Finance)

1. What Is CeFi

CeFi (Centralized Finance) refers to crypto financial services that operate through centralized intermediaries — exchanges, custodians, and lenders that hold user funds and manage order books, just like traditional finance but for crypto assets.

2. How It Works

A CeFi platform runs centralized order books and matching engines, holds user deposits in its own wallets (custody), verifies identities (KYC/AML), and offers products like spot trading, margin, staking, lending, and yield. Users trust the platform to execute trades and safeguard funds; withdrawals depend on the platform's solvency and cooperation.

3. Why It Matters

CeFi provides the on/off ramps, liquidity, and convenience that make crypto usable at scale — most retail users first buy crypto on centralized exchanges. But custody concentration creates counterparty risk, as demonstrated by collapses like FTX. The CeFi/DeFi spectrum is central to how users weigh control versus convenience.

4. Key Facts

• Leading platforms: Binance, Coinbase, Kraken, OKX
• CeFi offers higher throughput and fiat rails than most DeFi
• Custody risk: "not your keys, not your coins"
• Insurance and audit practices vary widely

5. Related Concepts

• crypto-wallet
• aml
• compliance
• institutional-custody