What is Centralized Finance?
This is the extended version of the domain review for CeFi.com. New sections appear outside the brackets.
You can read the compact version here. The article looks into the next stage of the crypto space and why Centralized Finance (CeFi) will be an important catalyst for major p-playesr from the world of traditional finance.
[Looking to take a position at the nexus of FinTech and traditional finance? CeFi.vc may be just the ticket.
Prior to the rise of Decentralized Finance (DeFI) in the last years, most all exchange of crypto assets occurred via Centralized Finance. You traded on an exchange or otherwise interacted in cryptocurrencies, but your assets sat on the books of that CeFi institution, rather than in your own personal wallet.
You were trading with your crypto, but a third party was ‘minding’ it for you. You were also thus entirely subject to the rules and whims of the intermediary party, i.e. that extra nerdy dude in your class who googled bitcoin earlier than you, set up an exchange and is oh so very bad at remembering wallet keys (it’s all those damn squiggles, I tell you!).
Much like the way your fiat money sits in the traditional bank in town. It’s your money in there, just don’t try to withdraw it too quickly or upset the person at the desk marked ‘manager’.
DeFi has altered the landscape, especially in regard to lending, but today the Centralized EXchange, or CEX, remains the venue of choice for trading crypto. Crypto.com, Kraken, CoinBase, Binance. These are all Centralized Finance.
Why will Centralized Finance matter?
But if DeFi is sure to be the far more secure, entirely unSBFiable bedrock of the future crypto scene, won’t this mean less room for Centralized Finance?
Because here’s where the real money steps in..
And the pathetic millions of new money flash-in-the-pans just can’t cope. For the Establishment has finally found their spectacles and sits aghast at the news coming in over the ticker tape..]
Of weary age and sporting the same haircut he wore to Breton Woods. Traditional Finance is nonetheless finally getting his (slipper-lined) skates on in embracing web3=era tech. Determined to show the kids who’s boss. But before the younger ‘uns amongst you begin to sneer, do note in your palmtop that these actors are backed by some of the largest fortunes ever amassed by humans and should not be underestimated.
Clearing his throat, Mr. TradFi has but one question:
How to get exposure to the crypto market without dealing with the volatility suffered by the plebs?
Residence restrictions notwithstanding, anyone can sign up with any kind of exchange and buy a bitcoin for $67k, then, safe in the knowledge that this is the done thing, naturally lay it aside like you would digital money in the bank. Reflecting upon this particular shade of digicash during the following weeks solely when in need of a smug chuckle at just how far ahead of the pack you really are.
Now, that’s all well and fine for one bitcoin, you can call the whole process conceptual art and sell a commemorative NFT of the ordeal for at least $50k. But any fund manager worth their salt has at least $100 million in assets under management.
Assets owned by people who have never heard of NFTs — and know where the fund manager lives.
Even suggesting that they directly acquire this cosmic ping pong ball traded as a securimmodity is likely to cost the fund manager their job.
So what is Mr. TradFi to do?
He’s not just missing out on gains, people are pointing fingers and questioning why his entire system still runs on Antikythera Pro. Plus publicly declaring at the beginning of each fiscal year that this is the one when Bitcoin will fall doesn’t seem to work anymore.
The answer to his plight?
(Short the shit out of the market!…Then Scoop up the corpses!
Well, okay, yes. But then what?
..short the shit out of the market! Okay! Yes again. Fair enough But how?
Engineering exposure to crypto
So. you play in the crypto space, but the game is set up by a centralized component. You use your high-fandangled fin expertise to engineer exposure to crypto that is less risky. And where there are multiple layers of separation between your delicate old money and lightning crashes caused by Elon’s mate grabbing his phone and tweeting the wrong emoji.
As the motto of our age goes, IANAFAATINFA (I am not a financial advisor and this is not financial advice), but in our view this is likely how they will arrogate for Mr TradFi his slice of the cryptopie.
[And as they do, the domain CeFi.vc will be well positioned to show you know the score. This domain is aptly set in the .vc extension, itself witnessing a scramble by traditional investment actors. All eager to dominate their branding space and show that they’re with it by grabbing what has become the default extension for Venture Capital (but is also seeing wider use among all things financial).
In the final reckoning then, the whole CeFi.vc ensemble would work beautifully as the home of the foremost actor in this area.] That ‘F’ also looks like a dandy place to set down (and then forget) your spectacles.