7 Major Differences Between Centralized and DeFi Wallets
Updated: Sep 15, 2021
The Decentralized Finance (DeFi) sector continues to expand, as many individuals and institutional investors want to benefit from high-yielding opportunities. They also realize that blockchain has the potential to transform financial services and introduce innovative solutions revolving around adecutomation, decentralization, scalability, and security.
The price of ETH versus BTC more than doubled during the 12 months to the end of January 2021 despite Bitcoin’s incredible rally. While it’s true that the surge has to do with Ethereum’s upgrade to ETH 2.0, it also reflects the increasing demand for DeFi projects.
There are many DeFi projects and tokens today. To manage DeFi assets, you’ll need a good DeFi wallet, which is more advanced and functional than a regular centralized wallet. With Eidoo, you can benefit from the full range of DeFi wallet advantages, as it provides the best such product on the market.
To understand how a DeFi wallet compares to centralized solutions, here are the seven key differences between the two:
Control over funds — DeFi wallets are non-custodial, meaning that the user is holding the private keys and has full control over the crypto funds. Elsewhere, centralized wallets are provided by crypto exchanges, online wallet services, or other entities. Thus, the private keys are held by third parties that have the final word in any transaction.
Supported assets — both centralized and DeFi wallets can host a large number of assets. Still, the main difference between a centralized vs DeFi wallet is that the latter is focused on DeFi projects in the first place. Thus, any DeFi wallet supports ERC-20 tokens, as most DeFi projects are built on Ethereum. Eidoo supports all ERC-20 tokens, as well as Bitcoin, Litecoin, and other non-Ethereum assets.
Investment features — DeFi wallets are the gateway to yield farming and staking opportunities in the DeFi market, which is not necessarily true about centralized wallets. Eidoo enables users to enjoy all DeFi wallet advantages from the app.
KYC Procedures — since DeFi wallets are non-custodial, users don’t need to go through KYC (know-your-customer) procedures or share background information. Elsewhere, centralized wallets are operated by specific entities that seek to comply with the regulations in their respective jurisdictions. As a rule, users have to share their ID data before withdrawing crypto funds.
Security — one of the key differences between a centralized vs decentralized wallet has to do with security. Centralized wallets are susceptible to hacking attacks, which happen quite often. Many large crypto exchanges have dealt with such attacks and theft attempts. DeFi wallets are way more secure since users keep the private keys with themselves.
Compatibility — Most centralized wallets are integrated into a larger ecosystem built around the exchange platform or other flagship product, which is why users adopt such wallets in the first place. However, DeFi wallets can also be part of the DeFi-oriented ecosystem. Also, most DeFi wallets are compatible with web3 wallets.
Fiat operations — the DeFi wallet is the future, but people still need to connect with the fiat world. Many centralized wallets enable users to easily convert crypto to fiat and vice versa. While this feature is not necessarily integrated by DeFi wallets, Eidoo supports fiat operations, though users have to pass the standard KYC verification procedure.
DeFi wallets enable users to interact with the DeFi space. They have more advantages compared to centralized wallets, as they already integrate the standard options.
Eidoo is currently the best DeFi wallet thanks to its unique features, such as yield farming opportunities, NFT manager, the eidooCARD, fiat on- and off-ramp, and a built-in decentralized exchange.
If you want to explore the DeFi opportunities, download the Eidoo app and enjoy the best features out there!