The current centralized finance ecosystem is riddled with many shortcomings and frustrations. While decentralized finance removes those aspects, it will not necessarily replace the existing status quo. Instead, open collaboration between CeFi and DeFi will provide much better results.
The Shortcomings Of Centralized Finance
It is no secret that centralized finance - banks, insurance providers, and other service providers - have brought plenty of innovation to the table since the monetary system was invented. Without these institutions, using money regularly would prove incredibly cumbersome. Unfortunately, it also appears as if centralized finance - or CeFi - is growing stale, with little or no room to innovate further.
Services and products have not changed much in the past two to three decades. Requiring approval to borrow, lend, or earn interest seems like an outdated concept. That doesn't mean CeFi has no strong points, though, as certain aspects will prove valuable for some time to come. It is pertinent for decentralized finance providers to incorporate these elements accordingly.
One such aspect is the Know-Your-Customer verification. Although die-hard cryptocurrency fans oppose this regulatory measure, it may prove a necessary evil. Whether it will continue to exist in its current form or become more suited for decentralized finance remains unclear.
Huobi Global’s Senior Director of Global Business Chern Chung adds:
“There are a growing number of KYC solutions designed specifically for DeFi protocols, but they haven’t yet been tried and tested in the same way that traditional KYC procedures have. Our KYC protocols, for example, have been developed in collaboration with many different regulatory and financial agencies.”
As more centralized exchanges now begin integrating DeFi protocols directly, the KYC aspect's evolution will become even more crucial.
When CeFi Meets DeFi
In the cryptocurrency world, there is an outspoken crossover between centralization and decentralization. Following the recent integration of Kava's technology by Huobi Global, it is now possible to enjoy the best of both worlds. Holders of the HBTC asset can now begin to lend, borrow, and earn in a decentralized manner without requiring any permission.
Huobi Global is one of the world's leading digital asset organizations. Having such an institution support Kava confirms centralized exchanges play close attention to proceedings in the DeFi space. More importantly, the company is confident that listing new DeFi tokens on its exchange is only the first step. Actively seeking a deeper collaboration with DeFi protocols and developers will drive future innovation and adoption.
Additionally, Huobi feels now is the time to invest in the technological development of DeFi. The team has set up Huobi DeFi labs and created a Global DeFi Alliance spanning many international centralized and decentralized service providers, including NEST and Maker Foundation. The recent integration of Kava's technology further confirms Huobi's growing focus on decentralized finance projects that can trigger a mindset shift.
With most cryptocurrency users keeping funds on centralized exchanges, the integration of DeFi protocols marks an important milestone. It is pertinent for exchanges to tap into a new audience not accustomed to or invested in cryptocurrencies. Creating a more compelling offer not only to buy cryptocurrencies but using them for lending, borrowing, and earning interest is one way of achieving that goal.
Kava is at the forefront of DeFi development today. As major centralized exchanges begin implementing their technology on a broader scale, partners will be able to attract more users to the crypto industry and allow them to experiment with these new financial options at their disposal. Users can benefit from centralized finance benefits while tapping into decentralized finance solutions without having to leave the exchange's ecosystem.
Making DeFi participation as simple as performing a few mouse clicks is essential at this stage. Kava is doing precisely that with the help of the world's leading cryptocurrency exchanges.