Have you invested in Hybrid Finance yet? HyFi: The bridge between CeFi and DeFi is here!

When it comes to investing your hard-earned money, you know there is an overwhelmingly large number of ways to do it. So many options in fact that you probably often feel paralyzed with all of your choices and never even end up taking any action. However, if you are interested in investing within the cryptosphere then you won’t want to miss out on this! Firstly, you probably feel like you need to decide between centralized finance (CeFi) and decentralized finance (DeFi). Most people are unaware of the differences between these two structures. Both CeFi and DeFi come with their major strengths and weaknesses. But what happens when you combine the two?

In this article, we will look into the characteristics of CeFi and DeFi. And most importantly, we will explore what you and the entire world can now achieve since Gain DAO combines the strengths of the two to form a revolutionary new financial structure. This new concept is going to be the future of finance… Hybrid Finance.

Centralized Finance (CeFi)

Before the existence of decentralized finance (DeFi), centralized finance (CeFi) was the standard for trading cryptocurrency. CeFi essentially mimics the financial industry. It allows people to earn interest or get loans, whereby they use their cryptocurrencies as a form of collateral. In CeFi, all crypto trade orders are handled through a central exchange. The exchange identifies which coins are listed for trading and sets the amount of fees you need to pay to trade. Furthermore, you are subject to any additional rules a centralized exchange might impose.

Everyone that invests money on a central exchange, intuitively understands what CeFi is. Even if you haven’t heard the term before. CeFi or centralized finance means that there is a central element in the trading process. Centralized finance may sound stable and familiar. However, the anatomy of this structure contains some key weaknesses.

Centralization means that for every centralized process, there is a single point of failure. What does failure mean in this context? Think, for example, about the business itself failing. It can also mean that a central point of decision-making within the business can approve or decline a request. This central point can approve or decline a transfer of your money from your account with them to your bank. In summary, both the platform itself and a potential loss of the platform can be points of failure. Points of failure cost you money.

It is easier to grasp this concept with an example. Have you ever had a transaction with a bank or payment app declined, even though you wanted to buy or sell a product? This is a moment when you experience centralization and points of failure.

Decentralized Finance (DeFi)

Decentralized finance or DeFi, removes the need to trust a middleman or corporation. The key component to DeFi is the application of smart contracts to financial instruments. Users of DeFi now trust a protocol instead of a corporation or human. DeFi has the advantage of non-custody which means decentralized protocol users have full control of their funds. They only need to interact with a protocol’s interface to carry out their activities. The possible actions include, but are not limited to, lending, trading or even swapping from one crypto to another.

Unfortunately, even the amazing concept of DeFi trading still comes with some weaknesses. The decentralized economy is growing substantially but it is still young. This means that there are currently places where its infrastructure and scalability are lacking. Scalability is associated both with computer systems and business change. In either case, it refers to the ability to adapt, particularly in regard to growth and increased demand. Scalability is essential in that it contributes to competitiveness, efficiency, reputation, and quality.

Introducing Hybrid Finance (HyFi)

Hybrid Finance combines the strong suits of DeFi and CeFi. Compared to DeFi markets, fiat currency markets, also known as the Forex market, offers greater stability and liquidity. And with the development of automated trading algorithms, we now have the perfect tools that can be utilized to profit from these strong characteristics. The success of such algorithms is dependent upon high amounts of liquidity, competitive exchange rates, and high-quality historical data. Most cryptocurrency markets still lack these features. This means that algorithmic trading tends to be more successful in traditional currency markets. In this way, HyFi offers the best of both worlds.

At Gain DAO, we are pioneering Hybrid Finance (HyFi). We are an Ether-based pool, powered by machine learning optimized trading algorithms. At the same time, we are operating in traditional financial markets. Therefore, we are truly a Hybrid Finance ecosystem to serve as a bridge between centralized and decentralized financial markets. Gain DAO allows any user of Ethereum to participate in a collective effort to trade fiat currency utilizing the highest quality and most thoroughly tested machine learning algorithms. By leveraging the strengths of both CeFi and Defi, we created something new. And we are convinced: HyFi is here to stay!