Decentralized vs. Semi-Centralized On-Chain Lending: What's the Difference?

Paul Faecks
February 10, 2023
5 min read
Decentralized vs. Semi-Centralized On-Chain Lending: What's the Difference?

On-chain lending has become increasingly popular for those looking to access capital or borrow funds without using a conventional bank. However, it's important to note that on-chain lending can be decentralized or semi-centralized, depending on the approach.

In this article, we'll explore the differences between decentralized and semi-centralized lending and look at some of the most popular platforms in the latter category, including Maple, Goldfinch, and TrueFi. We'll also discuss the benefits and drawbacks of each approach to help you decide which one is best for you.

What Is Decentralized Lending?

Decentralized lending allows borrowers and lenders to interact directly without intermediaries. This type of lending is powered by blockchain technology, enabling participants to take out and offer loans without a third party. The process is automated and facilitated by smart contracts deployed on a particular blockchain, often Ethereum.

Although there are several decentralized lending protocols, each allows lenders to deploy capital transparently and securely while ensuring borrowers can access funds quickly and without the need for banks or other financial institutions. In addition, this type of lending eliminates the risk of counterparty default because collateral is locked in smart contracts, and transactions are immutably recorded to the underlying blockchain.

With decentralized lending defined, let’s take a closer look at the benefits and drawbacks of using these platform

The Benefits of Decentralized Lending

Those looking for a fully automated, trustless lending experience can expect the following benefits when accessing decentralized lending protocols:

  • Flexibility: Decentralized lending offers more control to users because all transactions occur directly between the two parties involved. This dynamic makes it easier to customize loan terms and get better interest rates.
  • Accessibility: As there is no intermediary, decentralized lending offers faster transaction times and lower transaction costs.
  • Immutability: Decentralized lending platforms are generally secure and immune to tampering, given the immutable nature of blockchain transactions.
The Pitfalls of Decentralized Lending

Like any emerging technology, there are also specific challenges when using decentralized lending platforms—here are a few:

  • Lack of Risk Management Tools: As decentralized lending is still relatively new, many of these platforms need features like credit scoring and risk management tools that traditional lenders offer.
  • Less Customer Support: Decentralized lending provides a different level of customer service than traditional lenders, which can lead to confusion for inexperienced users.
  • Less Liquidity: Because of the peer-to-peer (P2P) nature of decentralized on-chain lending, it can be difficult for borrowers to find lenders with the right terms and conditions for their needs.
What Is Semi-Centralized Lending?

Semi-centralized on-chain lending is a variation of decentralized finance (DeFi) that combines centralized and decentralized lending elements. It provides users an alternative to traditional banking, offering access to loans and other financial services without involving a third-party intermediary. Like decentralized lending, it utilizes blockchain technology to support secure, trustless transactions that are automated and immutable.

However, unlike fully automated decentralized lending, semi-centralized lending requires oversight from a designated entity such as Maple, Goldfinch, and TrueFi. This entity acts as a mediator between lenders and borrowers and ensures that all parties comply with the agreed terms. As a result, borrowers can expect transparency in the loan process while lenders can get better returns than traditional lending models.

The Benefits of Semi-Centralized Lending

Semi-centralized lending platforms offer unique benefits compared to decentralized lending and traditional financial services:

  • Loan Flexibility: Semi-centralized lending allows borrowers to customize their loans more quickly than in a completely decentralized setting, tailoring terms to their unique needs.
  • Accessibility: Because the underlying architecture is partially centralized, lenders and borrowers can expect faster transaction times than with traditional finance (TradFi).
  • Lower Default Risk: Finally, because semi-centralized platforms can evaluate and approve loan applications before issuing, lenders can rest assured that their money is safe from potential defaults.
The Pitfalls of Semi-Centralized On-Chain Lending

Like decentralized lending and TradFi, there are downsides to using semi-centralized platforms:

  • Increased Censorship Risk: Because the underlying platform is not entirely decentralized, there is a greater risk of censorship if the lending platform selectively approves or rejects specific loan requests.
  • Compromised Privacy: As with any centralized platform, there is a higher risk of personal data being compromised due to security breaches.

Now that we've broken down the pros and cons of semi-centralized lending, let's take a closer look at some of the most popular platforms available to investors.

Semi-Centralized Lending Platforms

Each platform is a hybrid of centralized and decentralized infrastructure, offering unique features to those looking to participate in the digital asset class.


Maple is a semi-centralized lending platform that provides borrowers access to low-cost, short-term capital. It offers an innovative solution to traditional P2P lending by making it possible to borrow and lend in the same ecosystem. Specifically, Maple allows borrowers to deposit ether (ETH) as collateral, while lenders can use a risk-adjusted investment portfolio of loans. It's also the first platform to offer an integrated wallet, allowing users to send and receive ETH and access a suite of financial services such as lending, investing, and staking.


Another notable platform is TrueFi, a fully automated and trustless protocol built on Ethereum. TrueFi allows users to access instant loans without completing a formal onboarding process or complex paperwork. In addition, TrueFi leverages its open-source code to ensure that all transactions are transparent and secure. TrueFi users can also access financial services, such as staking, asset management, and liquidity provisioning.


Goldfinch is a semi-centralized lending platform that uses a network of vetted investors to create investment opportunities and provide borrowers with fast, low-cost capital. It also offers a full suite of financial services such as investing, staking, and liquidity provisioning, all within a secure and transparent ecosystem.

Goldfinch also utilizes machine learning (ML) algorithms to ensure investors make informed decisions about their investments and minimize risks. At the same time, borrowers benefit from faster approval times and access to competitive interest rates.

The Rise of Semi-Centralized On-Chain Lending

Semi-centralized lending has become an essential component of the DeFi ecosystem. This trend will likely continue as semi-centralized platforms provide users with the best of both worlds—the security and decentralization of blockchain solutions and the improved scalability, usability, and reliability of traditional financial systems. This hybrid approach to DeFi allows users to take advantage of the speed and cost savings of blockchain-based protocols while providing a more user-friendly experience than fully decentralized options. As a result, platforms such as Maple, Goldfinch, and TrueFi are leading the way in semi-centralized on-chain lending, enabling more users to access the benefits of DeFi without compromise.