While there are inherent strengths to be found in both centralized finance (CeFi) and decentralized finance (DeFi) companies, there are certain areas in which DeFi shines, including user empowerment, transparency, and reach. If CeFi companies can’t keep up with the user expectations being set by DeFi technologies and protocols, their advantages may come to count less among younger users and markets.
One area that CeFi can benefit from DeFi is the idea of not playing favorites. In DeFi, rules and regulations are immutably inscribed on the blockchain, meaning that there are no “favorites” in the DeFi protocol. CeFi companies can also learn from DeFi’s focus on financial inclusivity, aiming to provide access to financial services for unbanked and underbanked populations. By leveraging blockchain technology and reducing entry barriers, CeFi firms can create more inclusive products and reach untapped markets.
DeFi companies have democratized financial services, providing access to anyone with an internet connection. CeFi products can adopt user-friendly interfaces, lower barriers to entry, and offer inclusive financial solutions to reach a broader user base. By embracing blockchain’s decentralized ethos and the level of transparency and clearly recorded proofs of reserves that DeFi protocols prioritize, CeFi companies and their users would benefit.
Transparency in transactions and asset holdings should be a goal for CeFi companies looking to emulate DeFi’s success. By putting transactions and wallets on-chain and regularly reporting holdings, CeFi companies can gain greater trust from their customers, leading to more business. Furthermore, CeFi companies can learn from DeFi by emphasizing user empowerment and users’ control over their financial assets.
By adopting a community-driven decision-making process and embracing interoperability, CeFi companies can allow users to participate in directing the development process and integrate services, creating richer customer value propositions. However, it is also important for CeFi companies to establish a more open ecosystem, fostering open innovation and interoperability via decentralized protocols and open-source development.
In conclusion, for CeFi companies to better serve their current users and avoid a slow slide into irrelevance, they should take a close look at the aspects of CeFi consumers find most appealing and consider implementing the leading DeFi practices mentioned above. By doing so, they can better meet the changing needs and demands of users while staying competitive in an increasingly digital, global economy.
Source: Cointelegraph
