Centralized finance platforms have played a pivotal role in driving the adoption of digital assets and blockchain technology. However, their track record of catastrophic failures underscores the need for institutional investors to consider decentralized finance (DeFi) as a more secure alternative. DeFi platforms are poised to usher in a new era of innovation by providing the infrastructure required to bring institutional funds onto the blockchain.
Vulnerabilities in Centralized Finance (CeFi):
The history of CeFi platforms is marred by significant failures, including Mt. Gox, FTX, and BlockFi. These platforms have exhibited vulnerabilities, ranging from hacking incidents to bankruptcy, resulting in substantial losses for retail and institutional investors. Unlike traditional banking, the crypto industry lacks "too big to fail" services, as the collapses of Mt. Gox and FTX have demonstrated. Even today, CeFi struggles to upgrade its infrastructure to address security concerns.
Challenges in 2022 further highlighted CeFi's limitations, as it failed to provide transparent and secure investment management, often commingling customer funds and lacking robust risk management practices. Centralized exchanges also exert excessive control over user funds, making the risks associated with CeFi too significant to ignore.
Advantages of DeFi in Asset Management:
DeFi offers institutional investors greater control and security over their assets. These platforms prioritize transparency and security through decentralization, with all transactions recorded on-chain for real-time asset visibility. Investors can retain custody of their digital assets, mitigating risks associated with third-party custodians, as exemplified by the loss incurred by Prime Trust.
Challenges in DeFi:
DeFi presents its own challenges, primarily its highly fragmented nature. Ethereum remains dominant, but other efficient networks like Avalanche, BNB Chain, and layer-2 solutions such as Arbitrum, Polygon, and Optimism are gaining traction. To cater to institutional investors, a hybrid approach that combines the convenience of CeFi with the transparency and security of DeFi is ideal.
Unlocking DeFi Opportunities with Velvet Capital:
Velvet Capital, backed by Binance Labs, offers institutional investors the opportunity to explore DeFi across multiple chains, providing liquidity, reducing fragmentation, and enabling diversified DeFi portfolios. This cross-chain infrastructure, coupled with an intuitive interface, facilitates the launch and management of tokenized funds, portfolios, yield-farming strategies, and structured products.
Velvet Capital operates as a DeFi protocol, offering on-chain portfolios with complete transparency. Investors can hold their assets in noncustodial wallets or multisignature vaults, eliminating concerns about asset custody.
The platform simplifies the creation and management of crypto financial products, enabling users to focus on asset selection and strategy development across various chains. Velvet Capital is the first DeFi protocol to offer omnichain asset management capabilities, allowing portfolio managers to execute complex strategies across ecosystems like Ethereum and BNB Chain.
Velvet's marketplace feature allows users to access the crypto market alongside hedge funds and asset managers, offering index funds and funds run by both institutional investors and experienced crypto traders. The project also plans to introduce decentralization through a decentralized autonomous organization (DAO) and offers the Founders Club NFT collection as a gateway to DAO participation.
Velvet Capital is set to launch its institutional-grade, omnichain DeFi operating system, providing investors with a safer and more inclusive way to engage with the crypto space while mitigating CeFi risks. Interested parties can schedule a demo through their website. Projects like Velvet Capital are leading a financial revolution by leveraging DeFi infrastructure to democratize asset management in an era dominated by centralized financial institutions.