From Cefi to Defi to DNP

Current Problems with Centralized Finance

Although DeFi is still in its early years, DeFi Markets offers a breadth of new advantages over Traditional Finance Markets and CeFi Centralized Crypto Finance markets. Traditional finance markets are financial institutions like banks or peer to peer lenders that provide lending services seen today on US stock markets such as Repos, CDS and Treasury Bills or personal finance such as Car Loans and Mortgages.

Similarly, CeFi is essentially crypto banking that centralizes the crypto currency trades and funds are managed by specifically running the central exchange, this means someone don’t own your private key to access your wallet. While both traditional and CeFi financial markets work fine, they are imperfect in their transitions for users. They are susceptible to getting hacked, malicious intent in the form of bad loan agreements, high transactional fees, instant liquidation delays and long due diligence processes such as KYC to name a few.

DeFi or Decentralized finance is a blockchain-based form of finance that does not rely on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments; and instead, utilizes self-executing smart contracts10 on blockchains, themost common being Ethereum. DeFi lending allows users to become lenders or borrowers in a completely decentralized and permissionless way while maintaining full custody over their coins. Defi Lending is based on smart contracts that run on open blockchains predominately Ethereum. This is why DeFi lending in contrast to CeFi lending is accessible to everyone without a need of providing your personal details or trusting someone else to hold your funds. The rapid expansion of Decentralized Finance (or simply DeFi) is committed to building open financial services on blockchain networks, aiming at creating an open-source, permissionless,and transparent financial service ecosystem available to everyone without central authority.Instead of relying upon those centralized financial institutions as intermediaries, DeFi applications are deployed on top of blockchain networks, using infrastructure that distributes data and value across a network of computers. Users can subvert legacy central-entity-controlled business models, which are slow, costly and restrictive with credit permissions.

At present, the pledge system of standardized tokens such as bitcoin and Ethereum has been preliminarily mature. However, the provision of liquidity for non-standard assets is still very early, which is related to the development cycle of non-standard assets. At present, the most mature non-standard assets are NFT assets.