Decentralised vs centralised finance — key differences in custody, yields, risks, and which model Polymarket uses.
CeFi (Centralized Finance) = Traditional financial system plus centralized crypto platforms (Coinbase, Binance, Kraken). An intermediary controls your assets. You trust the institution.
DeFi (Decentralized Finance) = Open, permissionless financial protocols running on blockchains (Ethereum, Polygon, Solana). Smart contracts execute transactions automatically. You control your assets via private keys.
Polymarket itself is a DeFi protocol: a set of smart contracts on Polygon where markets resolve automatically based on predefined criteria — no company can override the outcome or freeze your USDC.
| Feature | DeFi | CeFi |
|---|---|---|
| Custody | Self-custody (you own keys) | Third-party (exchange holds keys) |
| Counterparty risk | Smart contract risk | Platform insolvency risk (FTX) |
| KYC/AML | Usually none | Required |
| Yields | 4–15% APY (variable) | 0–5% APY (regulated) |
| Accessibility | Anyone with internet + wallet | Requires account + ID |
| Recovery if lost | Seed phrase only — or gone | Customer support |
| Regulation | Minimal (evolving) | Licensed, regulated |
| Examples | Aave, Uniswap, Polymarket | Coinbase, Binance, Kraken |
As a Polymarket trader, you're already in DeFi — Polymarket is a DeFi protocol. Your USDC lives in your own MetaMask wallet on Polygon. No one can freeze it or prevent you from withdrawing between markets.
Beyond Polymarket, DeFi lets you put idle USDC to work earning yield between trades:
CeFi platforms remain essential for on/off ramps — converting USD to USDC and back. Kraken and Coinbase are the top choices for Polymarket traders. See our full exchange comparison for fees and step-by-step setup. Best practices:
ChangeNOW lets you swap 500+ crypto assets with no KYC — ideal for moving between DeFi protocols.
Swap on ChangeNOW →