When centralized exchanges and decentralized finance come together, there is unlimited potential for achieving great things.
When decentralized finance first came around, many people expected it to remain independent from centralized exchanges. In 2021 Kava paved the way with it’s Binance.com integration that proved the landscape to be more collaborative than competitive. Merging the best of both worlds will be beneficial to exchanges, DeFi protocols, and the user.
Centralized Exchanges Need DeFi
Many people keep their cryptocurrency portfolio in exchange wallets because it provides a lot of conveniences. Having funds in one place without worrying too much about maintaining a wallet is something many users want. However, once the funds remain there, one can’t do much with it other than transferring it to a different wallet and in turn, creates a bit of a lackluster scenario. As a result, users are demanding decentralized finance solutions for their wallets and exchanges.
Several trading platforms have already integrated other uses for customer funds. Staking native exchange tokens can yield some rewards, for example. There is also the option to borrow and lend crypto-assets, albeit in a limited fashion. All of these options are good, but they lack a decentralized aspect. As more centralized exchanges now begin to explore DeFi integrations, a new era dawns upon the broader industry.
Rather than being at odds with one another, DeFi and centralized exchanges can become powerful allies. First of all, this will bring decentralized finance to millions of users, as they do not have to leave the native exchange ecosystem. Second, it will help users take more control over their funds and potentially achieve a higher profit potential.
Huobi Global and Kava
One of the DeFi projects noting significant success in this department is Kava. Through its various products and protocols, users can lend, borrow, and earn by using their existing cryptocurrency holdings.
As decentralized finance continues to emerge as a promising application of blockchain technology, its growth needs to be fostered. Achieving a fully decentralized economy will require centralized service providers’ participation, including exchanges and wallet providers. Lowering the barriers to access innovative applications such as oracle networks, yield aggregation, and crypto lending is crucial at this stage.
Huobi‘s Senior Director of Global Business Chern Chung adds:
“We’re investing directly in the technological development of the DeFi space. Our new Ethereum-compatible chain, Huobi Eco Chain, provides blockchain developers with an efficient and low-cost on-chain environment for decentralized applications (dApps), smart contracts, and digital assets. HECO is the first product launched on Huobi Open Platform, a unified blockchain infrastructure platform independently developed by our own technical team.”
When centralized exchanges and decentralized finance come together, there is unlimited potential for achieving great things. To do so, the necessary infrastructure needs to be provided. Kava provides such infrastructure, as its users can experiment with lending, borrowing, earning, and the USDX stablecoin. It is also one of the few DeFi applications capable of supporting cross-chain assets, allowing Kava to tap into much broader liquidity.
Many people may think that decentralized finance is only for those who are already familiar with cryptocurrency. The opposite is coming true when centralized exchanges begin integrating DeFi solutions directly. Exchanges are still the gatekeepers to cryptocurrency adoption. Having them integrate DeFi solutions directly opens the doors to the wider cryptocurrency ecosystem without forcing users to leave the exchange platform itself.
Moreover, as exchanges become versatile in their services, they can bring in a much bigger audience. To facilitate that growth, ongoing collaboration between centralized entities and decentralized service providers will be essential. Kava and Huobi Global show the right path forward.
Founder and editor at BTC PEERS. Andrey writes about financial experiments, DeFi, cryptocurrency, and blockchain.