How to Unbank Yourself? The Power of Decentralized Payment Networks


There are 300 million cryptocurrency users across the world and the number is getting bigger each day. Given this, the crypto nation is in high demand for proper management, scalability and security of their digital assets. Thanks to the globalization of internet access and the next generation of technology powered by blockchain, new networks are emerging –  decentralized payment networks. It’s the beginning of a new technological era so we can expect that such networks will not only expand but also improve. 

A decentralized payment network refers to a structure where customers, users and suppliers can exchange money without a central authority that runs the network and keeps it operational and secure. Instead of relying on people (e.g. management of a bank), there are smart contracts in place which run on mathematical algorithms – private crypto key (usually a sequence of 10-20 words which you must not share with anyone – works like a password, but more secure) is the replacement of the traditional processing of payments. 

How does information sharing occur in a decentralized payment network?

It works on a “challenge-response interaction” where the user takes a public key (works similarly to an email) and encrypts a message. The message is then sent to the responder who decrypts the message, proves that the identity is real and then sends back the encrypted message with their own private key. This is called a digital signature. 

This new decentralized realm erases the need for independent authorities like exchanges, processors, trustees etc. whose main responsibility is to verify and store all the information. In essence, we won’t require centralized backed-up data anymore.

What are the main benefits of decentralized payments?

Firstly, they are cheaper, faster, more transparent and less prone to hacks. For instance, if I want to send you 100,000$ worth of, let’s say, Avalanche, this could easily be done through the AVAX Network. It doesn’t matter if you’re 10,000 km away or you’re living in the house next door. The transaction would be fully transparent (visible to public), the transaction fee would be negligibly small (~0.1 AVAX which is roughly 5$), you would get the money instantly as there is no bank in between and you don’t need to wait for a banker to check your information. On top of that, it is all algorithmically based which heavily reduces chances for error and consequently improves security of your digital assets. 

On the other hand, let's take for example an international transfer from Croatia to the Dominican Republic. The user has to pay a fee (a small percentage of the total amount) for the transfer and on top of that they also have to pay a currency exchange rate from Euro to Dominican Peso. This makes cryptocurrencies superior to fiat currencies as it’s much more user-friendly and intermediaries are eliminated.

Secondly, decentralized payment networks bring financial services to millions of people in developing countries that otherwise don’t have access to the global financial system. This allows them to access the financial system through their phone and everyone that has a phone can open any crypto wallet and send, receive or store their digital assets.

Lastly, decentralized networks give its users much more control over their money. There are no intermediaries between money transfers and there are no people involved in the process. As already said, everything is based on smart contracts and digital signatures.


Furthermore, there are also networks, like Celsius, Nexo and many others, that offer people the ability to control their own money while also earning interest on their digital assets. The main goal of such networks is to protect people like me and you from inflation and profit-oriented centralized companies and banks. They offer all the tricks that banks offer: borrowing against your assets, loans with low interest, how to earn high interest on your money; all those things might actually bring middle-class people closer to being financially independent. 

There’s still a lot of development needed in order for people to safely unbank as this is only the beginning of a new financial chapter. There’s not many people using those networks; yet. Realistically, in order to influence the government and regulators, the community would need at least 100 million people to sign up. To make an impact. 

Banks have a reputation for hundreds of years while cryptocurrencies are barely 14 years old. In addition, decentralized networks are babies that are here for just a few years. There’s still a long way to go but the concept might just work. Who knows, we’ll see what the future has in store for us.