One of the biggest losers in 2022 were the so-called CeFi (centralized finance) crypto projects. A good example is Celsius. Although, I never wish to see Celsius again, the question remains, can CeFi even exist in crypto? Do we even need it?
The answer to the first question is yes. To the second, it is no.
The ongoing crypto winter has claimed a lot of victims in the crypto lending sector in 2022. Questionable business models, among other things, led to several crypto lenders having to file for bankruptcy. There are some problems in the crypto lending sector - but also possible solutions that could make the industry fit for the future.
The way that cryptocurrency lending businesses operate is like a bank, but a very risky bank.
All cryptocurrency lenders have one thing in common: they lend the cryptocurrencies that market players deposit to other market participants, typically businesses.
By depositing their funds on a platform that loans them to borrowers who wish to borrow cryptocurrency and are prepared to put up collateral and pay interest on a loan, those with excess crypto assets can earn returns on their capital. This process is known as crypto lending.
Everything written above is a reason why there is a place for CeFi in crypto. In other words, they could act as a middleman between real businesses and banks and crypto.
But – this can easily be replaced and be done better by DeFi platforms. They also have their risks (talking about hacks), but at least they don’t steal money from you as CeFi companies did.
Don’t trust DeFi either. Or anything else, here is why: (The biggest cryptocurrency hacks up to date)
- Ronin Network: $625 Million
- Poly Network: $611 Million
- FTX: $600 Million
- Binance: $570 million
- Coincheck: $534 Million
- Beanstalk: $182 Million
FUN FACT: once, 7% of the entire BTC supply was stolen - anyone remembers that?
