Decentralization is (and has always been) what makes crypto strong
Although relatively young, the crypto market has experienced quite a lot of changes in the last 6 years. Recently, many crypto institutions collapsed, taking the crypto market with them. From the incredible bankruptcy of Celsius to the recent scandal of FTX, there have been enough drama in the crypto market for many Netflix series in the years to come.
However, this begs the question: why we went full circle and trusted central organisations holding our crypto? Wasn’t crypto supposed to be a no-trust platform to avoid central banks and financial institutions? As usual, the answer is not black and white.
The rise of DeFi
In 2020, Decentralized Finance (DeFi) platform emerged. The idea was not new (see Peter Thiel video from 1999) but the implementation was quite friendly, so many people could participate. The basic idea of DeFi is having no central authority but use the benefits of traditional finance such as lending and earning interests. This was truly what cryptocurrencies were meant to be.
Going full circle
Despite the successes of DeFi, the barrier to entry was still relatively high. One needed to have a good grasp of cryptocurrencies, including how to acquire such crypto in order to participate. Managing wallets, making swaps, holding one own keys are relatively simple for the aficionados but still too complicated for the average user.
CeFi (Centralised Finance) platforms started raising again in 2021. CeFi offered a low barrier to entry, making it easy to sue fiat and convert it to crypto. They also offered high interest rates and the ability to borrow. The best of traditional and new finance.
However, traditional finance is a highly regulated market with centuries in the making. While the markets were raising there were no problems, but when the market turned red the shortcomings were evident: putting too much trust into a single entity that is not audited is taking us back to the stock market in the 1930s. The crash was imminent, as we all can see.
Trust no one, except a few platforms
This takes us to an interesting conclusion: both CeFi and DeFi are here to fill a gap in the market. Although DeFi is definitely the way to go in crypto, it is now evident that CeFi is making crypto popular. In the measure that more CeFi platforms are being regulated, offer proof of capital or are audited by external parties, CeFi will become more stable. In the meantime we will have to keep a close watch on our own crypto, do a very good due diligence, and not be overexposed to CeFi platforms.
After all, cryptocurrencies are and has always been strong in avoiding central authorities. At YmplePay we believe that decentralisation is the main way to go, so you are able to hold your own funds while accepting payments. Reach us out if you want to know more about our solution.