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Centralized Finance (CeFi)
The traditional Centralized Finance (CeFi) system suffers from many problems including those of access, efficiency, time, and cost. But it has full support for KYC, AML & CFT and offers high grievance redressal mechanisms & consumer protection.
Decentralized Finance (DeFi)
Decentralized Finance (DeFi) is an umbrella term for financial applications powered by public blockchains. DeFi was supposed to solve the problems of CeFi, but it has created a new set of problems, including:
1. Near-zero support for KYC, AML & CFT
2. Near-zero grievance redressal & consumer protection
3. Unpredictable fees
Hybrid Finance (HyFi)
Hybrid Finance (HyFi) combines the best of centralized & decentralized finance.
HyFi = (CeFi + DeFi)∞
A Hybrid Finance Blockchain should have:
1. Full support for KYC, AML, and CFT.
2. Robust grievance redressal.
3. Strong Consumer Protection mechanism.
4. Support for data privacy and encrypted peer-to-peer connections.
5. Regulatory compliance with right-to-be-forgotten regulations.
6. Support for role-based asset controls for business, compliance, and regulations.
7. Support for freezing or quarantining of accounts and assets pending investigation.
8. Predictable & low transaction fees
9. Support for flexible asset metadata.
10. Support for atomic multi-asset payments.
11. Support for multi-way atomic asset exchanges.
12. Support for external private keys, multisignatures, and cold nodes.
13. Nodes operated by verified entities
14. Unified JSON-RPC API for integration with applications.
CeFi v DeFi v HyFi was originally published in Blockchain Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.