The current blockchain integration trend is still ongoing and Stellar is another project, worth looking at. 👀
What is Stellar?
Stellar is a blockchain designed for cheap, secure and high-speed international fiat and crypto payments between individuals and organizations. As of September 2022, there are over 5 million active addresses on the Stellar network.
The origins
Stellar has a lot in common with Ripple (Read this article to know more). The similar idea was caused by the two projects having the same founder. 🤝
Stellar was founded in 2014 by an American programmer and entrepreneur Jed McCaleb. At that time, he was known as a co-founder of the infamous Mt.Gox crypto exchange, and then as the co-founder and CTO of Ripple. McCaleb was very disappointed by the project’s high centralisation level, caused by the team focusing more on financial institutions, rather than the essential ideas of blockchain. Therefore, he decided to launch his own version, focused on private electronic payments. 🧾
In 2014 Stellar Development Foundation (SDF), that same year Stellar blockchain was launched. It was initially a clone of Ripple with the same codebase. However, in the spring of 2015, the SDF launched an update implementing a custom Stellar Consensus Protocol, developed by David Mazier. In May 2017, Stellar’s commercial division, Lightyear.io, began operating.💡
How does Stellar work?
The backbone of Stellar network is the Stellar Consensus Protocol (SCP), which was said to be the first provably secure consensus mechanism according to its creator David Mazier. 👨🎨
The procedure for reaching consensus and executing approved transactions consists of three stages:
- Nomination - nodes nominate candidate blocks and prepare them for approval. 🥇
- Voting - nodes vote for the candidates suggested by other participants as well as themselves. If a quorum is found, a “ballot” allowing the inclusion of a new block into the blockchain is created. 📃
- Time out - a mechanism, allowing nodes to discard failed candidates and restart the voting. 🔄
As of September 2022, there are about 40 active validator nodes on the Stellar blockchain. Only 3 of those belong to the SDF, while the rest are possessed by 20 organizations, including cryptocurrency exchanges trading the XML coin. This ensures complete decentralization and network security. 🔒
Thus, making the Stellar blockchain capable of processing more than 1000 transactions per second with an average confirmation time below 5 seconds. ⏳
The tokenomics
During the launch of Stellar network in 2014, around 100 billion XLM tokens were introduced with the inflation rate set at 1% per year.
Tokens were generously given away to every verified Blockchain.com user, which led to the rates collapsing and eventually a decision of burning over 55% of emission was made. 🔥
As of September 2022, the total supply has stabilised at around 50 billion XLM with more than 50% of coins already being in free circulation.
XLM
The Stellar Lumens cryptocurrency is traded on all the largest centralized crypto exchanges (both in the spot section and as futures) and can be stored in all the industry leading wallets. 💳
The XLM coin is used for three main functions in the Stellar ecosystem:
- Commission payments(0.00001 XLM per transaction).
- Stellar network account management (to activate the transfer feature, you must have at least 1 XLM in your Stellar wallet).
- Stellar blockchain unit of exchange.
- A currency used to provide liquidity for any tokens issued on the Stellar network.
Advantages and supporters
The Stellar blockchain allows you to quickly and cheaply create custom tokens with desired properties in just a few steps. Because of that the platform took the second place after Ethereum in terms of the number of ICOs conducted in 2018. 🥈
Another important advantage, caused by the simplicity of issuing tokens is the possibility to tokenize nearly any real asset. For example, stablecoins pegged to different national currencies can be issued. Free conversion to physical assets and fiat is carried out with the help of "anchors” - trusted financial organisations that provide free exchange of national currencies into XLM tokens and coins. Those can be considered as bridges between the traditional economy and the Stellar network. 🌉
Partners
Stellar has had lots of partnerships throughout the years, but we will only point out the main ones:
IBM
In the fall of 2017, Stellar started a partnership agreement with the IBM Corporation. Later that year, the IBM Blockchain World Wire service, allowing financial institutions to make international payments in seconds, was introduced. 🚀
MoneyGram
One of the main Stellar partners is currently the MoneyGram international money transfer service, which has 350,000 service points in 200 countries worldwide. In the fall of 2021, the company began using the Stellar blockchain for USDC stablecoin transactions. Thanks to the Stellar and MoneyGram cooperation in June 2022, users of Vibrant and Lobstr digital wallets in several countries now have the function of converting local currencies to cryptocurrencies and vice versa without the need for a bank account or plastic card. Kenya, Canada, the United States and the Philippines citizens are now able to use crypto as their main payment system much easier. 🌐
Conclusion
The project is Ripples first competitor and one of the DeFi/CeFi uniting. We will certainly be seeing news about Stellar in the near future, just like we will be seeing Ripple and Stellars intense rivalry. 🤺
Stay tuned 📻
