DeFi vs. CeFi: How to Choose the Right Bitcoin Loan in 2025

If you’re exploring bitcoin-backed loans in 2025, the variety of options can be overwhelming. You’ll see platforms calling themselves centralized finance (CeFi) and decentralized finance (DeFi). They sound similar, but the differences matter. Each has its own trade-offs in terms of security, transparency, control, and cost.

So which one is right for you?

At Sats Terminal, our goal is simple: help you compare bitcoin loans clearly, transparently, and without the jargon.

Here’s what you need to know before you borrow.

TL;DR

• CeFi: Centralized, familiar, often regulated—but less transparent.

• DeFi: On-chain, open, and efficient—but smart contracts and bridges can carry risk.

• True DeFi: Fully decentralized and transparent—but still early-stage.

Always weigh security, transparency, and cost before choosing.

What most people compare (and what really matters)

When most people take out a loan—whether in crypto or in the traditional finance (TradFi) world—they look at the headline numbers:

• How much can I borrow?

• What’s the interest rate?

• How long do I have to repay?

• What’s the Loan-to-Value (LTV)?

That’s fine. But those numbers don’t tell the full story.

What really matters are the hidden risks that drive them.

According to the Zone21 risk model, these are the big ones:

• Custody: Who holds your bitcoin—you, a custodian, or a company with admin keys?

• Wrapping and bridging: Does your Bitcoin stay native, or does it get wrapped and sent across chains?

• Governance: Can someone pause or change the rules mid-loan?

And a few others worth noting:

• Variable interest rates: In DeFi, rates can change fast when liquidity dries up.

• Stablecoin choice: A loan in USDC isn’t the same as one in DAI or USDT—each has different risks.

• Reputation: Bigger players like Coinbase may be forced (by regulation) to cover losses. Smaller ones might not. But that still isn’t an absolute guarantee.

Let’s look at an example: A 5% rate might look better than 7%, but if the lower-rate loan wraps your bitcoin or rehypothecates it behind the scenes, it could cost you far more in the long run.

CeFi: Familiar, but less transparent

CeFi feels a lot like traditional banking. You give your bitcoin to a company, and they handle the loan for you.

It’s easy, often regulated, and you can reach real customer support if things go wrong.

The trade-off? Trust.

You don’t control your bitcoin—they do.

If the platform fails, gets hacked, or freezes withdrawals, your collateral could disappear. Transparency is limited, and you can’t always see what’s happening behind the scenes.

CeFi = Convenience with counterparty risk.

DeFi: Transparent, open, and sometimes riskier

DeFi flips that model on its head. There’s no company in the middle—just smart contracts that handle deposits, interest, and repayments automatically on-chain.

You lock up collateral. You borrow stablecoins. Everything happens on-chain, visible to everyone.

That transparency is powerful.

But it comes with risk.

Chainalysis recently reported that by mid-2025, over $2.17 billion had already been stolen from crypto services, surpassing all of 2024’s losses in just six months. 

Many DeFi platforms rely on bridges or wrapped bitcoin, which add new layers of risk if those systems fail.

And when something breaks, there’s no customer service chat waiting to help.

DeFi gives you control—but it also gives you full responsibility.

When “DeFi” isn’t really DeFi

Here’s the twist: not every platform calling itself DeFi actually is.

Some are CeDeFi—a mix of centralized control, wrapped in decentralized marketing. They might run on-chain, but still keep admin keys or pause buttons that let insiders change how the system behaves.

That’s not truly DeFi.

It’s DeFi with training wheels—or, in some cases, with hidden hands on the brakes.

If a team can hit the breaks or change your loan, that’s not decentralization. That’s CeFi dressed up as DeFi.

True DeFi: Transparency without hidden levers

True DeFi means no intermediaries, no permissions, and no custody risk. Just you, your wallet, and the platform’s smart contracts.

That’s full transparency—and it’s where the space is headed.

Right now, true DeFi is still emerging. Most platforms still rely on governance votes or admin keys. But the direction is clear: toward systems where no one can quietly flip the switch behind the scenes.

Think of true DeFi as the gold standard for borrowing—self-custody, verifiable code, and total visibility.

Side-by-side comparison

Here’s how CeFi, DeFi, and true DeFi compare at a glance:

The transparency layer: Why it matters

This is exactly why we built Sats Terminal the way we did.

We use the Zone21 13 Risk Factors to score every loan provider across key dimensions like custody, rehypothecation, governance, and liquidity.

That means when you borrow through Sats Terminal, you’re not just comparing interest rates—you’re comparing risk profiles.

You see why one loan is cheaper than another, and what that means for your bitcoin.

Transparent loans, explained clearly. That’s the whole point.

FAQs

What’s the main difference between CeFi and DeFi?
CeFi uses a company to manage your loan; DeFi uses smart contracts. CeFi feels safer but requires trust; DeFi removes trust but adds code risk.

Is CeFi safer?
CeFi feels safer because it’s regulated and familiar, but hacks and mismanagement still happen. True safety depends on transparency.

Why isn’t true DeFi everywhere yet?
It’s still early. Building fully permissionless, non-custodial systems takes time, audits, and user education. But it’s coming fast.

The bottom line

There’s no one-size-fits-all answer. If you want simplicity, CeFi works. If you want control, DeFi fits. And if you want full transparency and self-custody, true DeFi is the next step. 

The key is knowing what’s behind the numbers—not just the rate you see on-screen.

Visit borrow.satsterminal.com to compare bitcoin-backed loans today.

Borrow smarter. Borrow transparently. Borrow with Sats Terminal.