The expansion of centralized exchanges (CEXs) into on-chain services is more than a defensive play — it’s a bold bet on the future of the crypto ecosystem. Major platforms like Bybit, Binance, and Coinbase are no longer passive observers of decentralized finance (DeFi); they’re actively shaping it. This strategic pivot raises a critical question: Why are CEXs, long reliant on stable and profitable business models, diving into the volatile world of DeFi?
This article explores the motivations behind this transformation, analyzes the different approaches taken by leading exchanges, and examines how the rise of CeDeFi — the hybrid fusion of centralized and decentralized finance — is redefining user experience, liquidity flow, and long-term platform competitiveness.
The Rise of CeDeFi: What Are CEXs Actually Building?
While often grouped under the broad term “CeDeFi,” the implementations vary significantly across platforms. Each exchange is crafting its own version of on-chain integration, tailored to its user base and strategic vision.
Bybit’s ByReal: Delivering CEX-Grade Liquidity on Chain
Bybit launched ByReal, a Solana-based DeFi platform designed to replicate the high liquidity and low slippage typical of centralized exchanges — but in a decentralized environment. Unlike traditional DEXs, ByReal combines a Request-for-Quote (RFQ) system with a Concentrated Liquidity Market Maker (CLMM) model.
The RFQ mechanism allows users to request quotes from multiple professional market makers before executing trades, ensuring optimal pricing. Meanwhile, the CLMM concentrates liquidity around active price ranges, boosting capital efficiency — a major upgrade over standard automated market makers.
Crucially, ByReal keeps assets self-custodied via Web3 wallets like Phantom, preserving decentralization at the user level. It also includes a token launchpad and yield-generating features such as the Revive Vault, which offers staking products like $bbSOL.
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ByReal’s strategic goal is clear: create a parallel liquidity layer for early-stage tokens that may not meet Bybit’s main exchange listing standards but can thrive in a community-driven, open environment. This positions Bybit as a bridge between retail innovation and institutional-grade execution.
Coinbase: A Dual-Track Strategy for Retail and Institutions
Coinbase is taking a bifurcated approach. At its 2025 crypto summit, the exchange announced plans to integrate DeFi trading directly into its main app, eliminating the need to switch to a separate wallet interface.
For retail users, this means seamless access to thousands of tokens at the moment of minting — all within the familiar Coinbase experience. No more juggling wallets or navigating complex gas fees.
But Coinbase isn’t stopping there. It’s also introducing Verified Pools, a feature exclusively accessible to KYC-compliant institutional participants. These pools offer a secure, regulated environment for entities with compliance obligations, combining DeFi’s flexibility with traditional finance safeguards.
This dual-track model enables Coinbase to serve both mass-market retail users and risk-averse institutions — a rare balance in the crypto space. By controlling both access and compliance layers, Coinbase strengthens its position as a gateway to Web3.
Binance Alpha: Simplifying Web3 for Mass Adoption
Among the three, Binance Alpha is the most retail-focused. Accessible via a tab within the main Binance app, Alpha allows users to trade early-stage tokens without leaving their familiar interface.
All transactions occur on-chain, but users interact through their existing Binance accounts — no need to set up a new wallet or manage seed phrases. This abstraction dramatically lowers the barrier to entry for Web3 newcomers.
Alpha also leverages Alpha Points, a points-based system that rewards engagement and enables targeted airdrops. While some tokens launched via Alpha have seen sharp post-launch declines — sparking debate over fairness and intent — the platform has undeniably accelerated access to innovation.
Why Are CEXs Embracing DeFi? Key Strategic Drivers
1. Capturing Early-Stage Token Opportunities
New tokens increasingly debut on decentralized exchanges (DEXs) like Uniswap due to their permissionless listing models. This trend leaves CEXs at a disadvantage — regulatory reviews often delay official listings, causing them to miss out on early trading volume and revenue.
By launching their own on-chain platforms, CEXs bypass this bottleneck. Services like ByReal and Binance Alpha act as semi-sandboxed environments where users can trade emerging tokens without requiring formal approval.
This allows exchanges to monetize user activity through transaction fees or launch incentives — while maintaining regulatory distance. They provide access without direct custody or endorsement, striking a balance between opportunity and compliance.
2. Retaining Users in an On-Chain World
User behavior is shifting. The most exciting opportunities — new token launches, high-yield strategies — are happening on-chain. Yet most users still find DeFi daunting due to wallet management, cross-chain transfers, and unpredictable gas costs.
CEXs are responding by embedding DeFi access directly into their apps. This keeps users within their ecosystems even as they explore decentralized opportunities.
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Over time, this creates powerful user lock-in. When exchanges control not just spot trading but also launchpads, cross-chain routing, and yield products — often built on proprietary chains like Coinbase’s Base — they become one-stop hubs for crypto activity.
The Future of CeDeFi: Trends to Watch
Blurring Boundaries Between CEX and DEX
As CEXs integrate on-chain services, the line between “exchange” and “protocol” is fading. A user trading on ByReal may not even realize they’re interacting with a decentralized smart contract — the interface feels like a CEX.
This convergence could reshape liquidity distribution, product design, and user journeys across the industry.
Institutional Caution and Gradual Adoption
While retail adoption is accelerating, institutions remain cautious. Risks like smart contract vulnerabilities, price manipulation, and opaque governance persist.
Even with exchange-mediated access, these structural concerns don’t disappear. Initial institutional participation will likely come from hedge funds and proprietary traders deploying small capital for experimentation.
Conservative players like pension funds may allocate only 1–3% of portfolios — if at all — in the near term. Predictions of billions flooding into CeDeFi are premature; hundreds of millions in measured tests are far more realistic.
The Evolving Role of Exchange Tokens
Native exchange tokens like BNB are poised for transformation. Currently used mainly for fee discounts, they could soon unlock deeper utility:
- On-chain fee rebates
- Staking rewards in CeDeFi protocols
- Priority access to new token launches
BNB already plays an active role across Binance’s ecosystem. Others may follow — especially platforms developing their own blockchains or DeFi layers.
Exchange tokens could evolve from utility tools into strategic assets that drive user retention, protocol integration, and cross-platform capital flow.
A Converged Future: DeFi Within CEX Ecosystems
The most likely outcome isn’t competition — it’s absorption. As CEXs build robust CeDeFi infrastructures, independent DeFi protocols may become dependent on them for liquidity and user access.
We may see a new market structure emerge: one where centralized platforms act as gravitational centers for DeFi activity, offering hybrid experiences that blend trust, transparency, and convenience.
Frequently Asked Questions (FAQ)
Q: What is CeDeFi?
A: CeDeFi stands for Centralized-DeFi, referring to hybrid financial platforms that combine elements of centralized exchanges (like ease of use and compliance) with decentralized protocols (like on-chain settlement and self-custody).
Q: Are CEX-run DeFi platforms truly decentralized?
A: Not fully. While transactions occur on-chain and assets may be self-custodied, many aspects — such as interface control, listing decisions, or backend operations — remain centralized. These platforms offer “decentralized-like” experiences with centralized oversight.
Q: Can I lose money using CEX-affiliated DeFi services?
A: Yes. Despite brand backing, these platforms involve exposure to volatile assets, smart contract risks, and market manipulation. Always conduct due diligence before participating.
Q: Will CeDeFi replace traditional DEXs?
A: Unlikely in the short term. Pure DEXs will continue serving privacy-focused and anti-censorship users. However, CeDeFi may dominate mainstream adoption due to superior UX and integrated fiat rails.
Q: How do exchange tokens gain value in CeDeFi?
A: As CeDeFi grows, exchange tokens can gain utility through staking rewards, launchpad access, fee discounts, and governance rights — increasing demand and potential long-term value accrual.
Q: Is regulatory approval guaranteed for CeDeFi services?
A: No. Regulatory scrutiny remains high. While some features (like Verified Pools) aim to meet compliance standards, many jurisdictions are still formulating rules around hybrid financial products.
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