CeFi, DeFi: The renewal of Savings

These days banks have the monopole of savings rate but a new trend is coming up to bring new adversity. It offers new rates and new rules providing an alternative to the old financial system. In this article you will see what can the alternatives on Fiat bank saving accounts(Fiat is currency such as Dollar, Euro, Yuan…) within the crypto ecosystem.

Disclaimer: This is not a financial advisement. Investing is at your own risk. This article only goal is to provide information and explanation on this new system growing up.


Definitions


Stablecoin

stablecoin is a reproduction of a currency such as dollar. It can be provided by a companyTether with USDT, Circle with USDC) or by a smart contract (DAI). Those entities or programs ensure that they have one dollar in the blockchain equals one dollar in the banking system.

 

 

Centralized Finance  (CeFi)

Centralized Finance is very similar with our current banking system. You have an entity/company in which you invest your funds. These companies provides large amount of financial product which is a mix between traditional banks and new economy.

 

Decentralized Finance (DeFi)

Decentralized Finance retakes the idea of no middle man as wanted Satoshi Nakamoto the Bitcoin founder. The process is fair and transparent while allowing everyone to use it. It’s permissionless and automatized by smart contract running on Blockchain applications.


Earnings


Banking system

In current banking system we can earn money by putting our money into financial product. In France we have the “Livret A” a flexible earning placement which provides 0,5% per year

It doesn’t even repay inflation.

CeFi

Current CeFi such as Coinbase,Nexo,Crypto.com are providing a lot of financial product within which stablecoin (crypto that is pegged to the dollar).

You can earn up to 12% per year

DeFi

DeFi product such as SushiSwap,Aave, Oasis (cf my article on Oasis here) are providing earning with lending, farming, liquidity provider program. 

It can goes from 2% to 30% per year depending on the platform and period.


CeFi


Centralized finance platform such as Binance or Crypto.com, on which I did an article a year ago, provides good rates while having the insurance of a company if there is any trouble (fund loss, helpdesk…). They provide currency exchange platform (including Fiat), borrowing & lending, earnings, derivatives, and many more.

They make money mainly on exchange transaction fees. For them the goal is to attract user to have a maximum of volume to improve their revenue.

They provide a lot of earning possibilities and aspire to become the Bank 3.0.

Binance

Crypto.com

 

 


 

DeFi


 

Lending

Aave

Aave is a remarkable Lending & Borrowing platform. You can borrow by putting a collateral asset such as ETH and borrow a stablecoin.

The lenders who provide liquidity are rewarded by an annual yield percentage:

Rates can change according to the market needs and you can withdraw your fund at any time.

This solution allows lending and borrowing without middle man. The trust is now on the smart contract.

SwissBorg

SwissBorg is a company that provides Yield (revenue) when providing asset for them. They have an algorithm that select the best platform yield percentage and gives you daily reward with a security in case of loss (special program, insurance…) .

This is a good use case of Company using DeFi.

Liquidity Providers

Uniswap

Uniswap is the most used decentralized exchange platform. To be sure that their is liquidity on their exchange assets, they reward people who provide liquidity. They will be rewarded by getting tax fees of the transactions on this pair.

Let’s say you have ETH and DAI you can provide liquidity by putting ETH & DAI into the Liquidity Pool.

You’ll get a percentage of the fees as a reward (according to the amount you provide divided by total pool amount) as you can see above.


Yield Comparison

USDC CEFI


 

Crypto.com

6% On flexible Terms

8% if Premium

12% If Premium and 3 Month Fixed terms Period

Binance

5% on Flexible Earning

Instant withdraw

Up to 8% on fixed terms savings

SwissBorg

Average of 20% with Premium

Standard 10%

1 Day to withdraw


USDC DEFI


Aave

At time of writing:

Around 8%

Oasis

At time of writing:

 Around 8%

Compound

At time of writing:

Around 8%

In this example I used Yield percentage on USDC the most secure stablecoin on the market at the writing time of this article. It is backed by Circle Square company with many audits on their accountability to verify that every USDC on the crypto market is backed by US dollar.

 

 

 

 

 

Conclusion

 

 

 

To conclude, there is a lot of ways to invest your sleeping money elsewhere than in your Bank account with low interest.

 Of course this new bank and new world may not be as secure as this big company bank yet they have the merit to offer an alternative.

Afterward, if you want to stay in more centralized way as in your bank you can use centralized platform that offers security. 

If you want by conviction to fully avoid bank system DeFi offer a great opportunity to be sure that you have financial liberty and freedom. Be careful if a bank can be robbed so is those platforms. Even if the risk stay very low, their isn’t 100% security in neither in those solutions only pros and cons. Then it’s up to you to make your own decision according to figure on the right.

On my side I’m lucky enough to have Swissborg Premium so this is where I rather put my money. Yet I’ve used DeFi & CeFi and I was very please by the services, I just went where the yields are higher (and provides enough security).

 

Hope this article can help you to rethink on how to use your money and gives enough information to improve your knowledge on that part.

Don’t hesitate if you have any questions regarding this topic!

 

CeFi, DeFi: The renewal of Savings Made by Guillaume Niay

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