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CeDeFi (Centralized Decentralized Finance, websites like Coinbase, Nexo, Blockfi, Celsius. Registered companies with licenses that will often advertise as being
by vmception 5y ago
CeDeFi (Centralized Decentralized Finance, websites like Coinbase, Nexo, Blockfi, Celsius. Registered companies with licenses that will often advertise as being the same as onchain DeFi services) offer fixed rates to customers, while they earn much greater variable rates in DeFi platforms, they pocket the difference. Just like TradFi (traditional finance) lenders we are all familiar with, the spreads are just much bigger right now, as expected in growing economies.
DeFi platforms are offering variable rates based on how many farmers and how much value is deposited that is trying to earn the same fixed amount of tokens, and those tokens current exchange rate. They are using present/historical data, as well as current exchange rates. These are not projections. Also do notice that APY, and APR are used interchangeably and inaccurately and not in any uniform way across platforms. Platform developers typically just choose whichever number shows the greater percentage.
Some DeFi platforms are just diluting their own token for some time, or indefinitely, and people earn that and hope the exchange rate support the greater supply long enough to convert out. Some DeFi platforms are successful at building a demand model and utility to offset the supply. Other DeFi platforms are doing something monetarily productive that earns the platform money which is distributed to stakers or farmers.
Hope that helps. There is no one way to evaluate or dismiss all defi products with a yield, but there are some patterns to look for and to understand why they attract so much capital on deposit so quickly. Much of the capital comes from CeDeFi looking for yield that won't cause them to loose all the customer money.
- edvinbesic 5y agoSmall nitpick but CeDeFi is a term coined by Binance to make them appear more palatable and competitive. Binance is a centralized network so it's a CeFi foundation with all the controls that come with that, but with a DeFi coat of paint. Coinbase is a centralized exchange (Cex, not a Dex) so it has little to do with DeFi in general.
- vmception 5y agoa) who cares who coined it, it is a classification used by many and quickly conveys the shared concept that matches that classification, which is the overall point of language b) Coinbase is many products. Coinbase Staking is the one that matches what was described above. Don't conflate the front facing CEX for everything they offer. No different than Amazon not being a bookstore, nor just an ecommerce platform. It is many products. The context was solidified amongst several other products with similar offerings. Coinbase's various CEX products have nothing to do with their Staking product (or the Lending one they were going to try, of Vault or several others)
- edvinbesic 5y agoa) it does matter because despite what you think CeDeFi is only there to create confusion in the industry. Centralized decentralized finance. Which is it? b) staking has nothing to do with DeFi
- vmception 5y agoso for anyone passing by (this isn't a response to you any more I no longer care what you think but I do care what others think) Banks and brokers that offer exposure to the defi market are called CeDeFi because you could interact with DeFi yourself with no restrictions but the organizations that help you are just banks and brokers so it is a centralized company layer on top of the defi market. Those come with restrictions. Their staking products allow you to provide them with liquidity, similar to a deposit at a bank or certificate of deposit (CD) at a bank, where they take your balance and put it in DeFi products to make a better yield for themselves.