Many believe DeFi, or “decentralized finance,” is the way of the financial future. Here we explore what DeFi is, how it works, and how it’s paving the way for innovations in the cryptocurrency and digital asset space.

What Is DeFi?

Think of DeFi as a way in which you can bank but without the stereotypical hidden fees and other hassles that typically come with holding your money in a traditional bank account. Utilizing emerging blockchain technology, you can safely and securely transfer money within minutes to anyone else who also is in possession of a digital wallet. These digital wallets are one of the cornerstones of the decentralized financial movement because they allow anyone with an internet connection to participate in the acquisition of digital currencies. These digital currencies—or tokens—can then be used to purchase goods and services or can be sent peer-to-peer, all without the bureaucratic rules and regulations typically associated with banking activities and transactions.

How Does DeFi Work?

To understand the basics of how DeFi works, it’s important to first understand how traditional banks work. Let’s use the example of a credit card purchase. Suppose you buy a load of bread and charge it to your credit card. Traditional banks operate by paying out the requested credit card charge to the credit card network, and then the merchant is paid for selling you the loaf of bread. Each party that’s part of this transaction is getting paid.

With DeFi, it’s all peer-to-peer, meaning if you want to buy a loaf of bread, the merchant sells you the bread, and using DeFi, you pay the merchant directly. The “middlemen” in this scenario is the blockchain technology that securely validates your transaction and moves the funds from one digital wallet to another.

What’s the Difference Between DeFi and Traditional Finance?

The main difference between traditional banks and DeFi is the processing time for transactions and the fact that DeFi never closes. Unlike traditional banks which employ people and have “regular” business hours, accessing and transferring funds using DeFi is limitless. You can send—mostly cryptocurrency—across DeFi networks anytime of day or night, with almost instantaneous processing speeds. With that said, unlike traditional banks, all transactions are final, meaning if you mess up and send funds to the wrong wallet—or worse—provide someone else with your incorrect wallet information, there’s no recourse. The only saving grace would be if you know the party whom you mistakenly sent your funds to and can (politely) ask them to send those funds back to you. You may also want to offer to cover any of their transaction fees.

What Is The Future Of DeFi?

The future of decentralized finance is bright and beautiful. As cryptocurrencies continue to become more mainstream and adopted into society, their functionality will become more legitimized, and thus DeFi could replace or overhaul the traditional banking systems in the not too distant future. While there will always be a need for the safety and security of the traditional financial system for a segment of the population, the growing convenience and ease with which DeFi is enabling personal and business financial transactions to take place on a global scale is undeniable. The more improvements continue to be made on the DeFi network and the more accessible it becomes to different worldwide communities, the faster we’ll see DeFi become the new industry standard in the financial realm.

For another cool future-looking player in the world of cryptocurrency, check out EtherumMax.

Starting Your Portfolio With EthereumMax

EthereumMax is a decentralized cryptocurrency that gives holders control of their digital assets without the need for an intermediary. EMAX Tokenomics remain 0% tax on buys, with a 6% tax on sells and transfers. From the 6% tax, 3% will remain in the treasury and 3% will manually be burned every other week. Check out for more information on why EthereumMax is quickly becoming one of the most robust tokens in the crypto ecosystem and set up your EMAX wallet to start your cryptocurrency journey today.