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A review of centralised finance (CeFi) and decentralised finance (DeFi) and its challenges to the lending market

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  • Al Mamoon, Abdullah

Abstract

In this work, we systematically analyse the differences and similarities between CeFi (Centralised Finance) and DeFi (Decentralised Finance). Financial technology is rapidly expanding, and large technology firms are making advances in credit markets. The Internet of Value (IOV), with its distributed ledger technology (DLT) as a basis, has developed new types of loan marketplaces. In this paper, we enumerate the prospects & challenges of Centralised Finance (CeFi) lending markets driven by banks and other lending institutes, as well as the benefits of DeFi lending protocols that may support resolving long-standing concerns in the conventional lending landscape. Overall, fintech and big tech credit appear to complement rather than substitute conventional forms of lending. This study provides a comprehensive analysis of the distinctions between CeFi (Centralised Finance) and DeFi (Decentralised Finance) lending. It analyses several aspects including legal considerations, economic factors, security measures, privacy concerns, and market structure. We conclude our study that convergence between centralised finance (CeFi) and decentralised finance (DeFi) can facilitate synergies in the lending market.

Suggested Citation

  • Al Mamoon, Abdullah, 2025. "A review of centralised finance (CeFi) and decentralised finance (DeFi) and its challenges to the lending market," EconStor Preprints 323253, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:323253
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    File URL: https://www.econstor.eu/bitstream/10419/323253/1/CeFi-DeFi.pdf
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    References listed on IDEAS

    as
    1. C Castro-Iragorri & J RamÔøΩrez & S VÔøΩlez, 2021. "Financial intermediation and risk in decentralized lending protocols," Documentos de Trabajo 19420, Universidad del Rosario.
    2. Michael Darlin & Georgios Palaiokrassas & Leandros Tassiulas, 2022. "Debt-Financed Collateral and Stability Risks in the DeFi Ecosystem," Papers 2204.11107, arXiv.org, revised Jun 2022.
    3. Carlos Castro-Iragorri & Julian Ramirez & Sebastian Velez, 2021. "Financial intermediation and risk in decentralized lending protocols," Papers 2107.14678, arXiv.org.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F30 - International Economics - - International Finance - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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