Stellar project purpose and description
What is Stellar?
Stellar is a cryptocurrency platform that brings payment systems, banks and people together. The core concept behind Stellar is to move money reliably, faster and at the lowest possible costs. It is a non-profit organization that is bringing low-cost financial services to maximize the potential of individuals, and in the long run, use their technology to fight poverty.
While most of the cryptocurrencies use distributed nodes in their blockchain networks to confirm and add transactions to their ledgers, Stellar uses standard nodes, delegated nodes, and servers, all distributed evenly in their network.
There are two core components upon which Stellar is built, Lumens (XLM) and the Stellar Core and Horizontal API.
Stellar is designed as a unique cryptocurrency, primed for value addition. The concept behind Stellar is to make it one of the main payment networks in the world, thereby making it grow to the same levels that Ethereum and Bitcoin have.
Through Stellar, it is obvious that individuals, entities and the banking system can work together within the blockchain ecosystem.
Instead of competing with banks, Stellar works with them as partners. Apart from partnering with banks, Stellar also does away with the need for mining.
Mining is one of the aspects of blockchain technology that makes some ecosystems expensive. This is because of the need to own mining hardware, which makes it a preserve for those who are either rich or have some funds to spare for the same. Instead of mining, Stellar uses direct distribution and focuses on the underbanked segments of the society through a consensus model.
What is the problem that Stellar Solves?
There are several challenges that exist not just in blockchain but also in the normal banking sector that Stellar attempts to solve.
Transaction fees are prohibitive in the banking sectors in so many countries, and this is one of the main reasons why most people tend to shy away.
It gets even worse when conducting transactions across borders.
Since the introduction of blockchain technology, there has been a lot of interest from different circles. Even with all the benefits of blockchain technology, platforms like Bitcoin and Ethereum are still overpriced for most users and this prices a lot of people out of the network.
Other than the cost, using these platforms can be complicated for the average person, and this is another area where platforms like Stellar come in handy.
Simplicity is one other aspect that Stellar addresses. Most of the people who are using and have made the most use of blockchain platforms like Bitcoin and Ethereum, other than buying and hoarding their coins hoping for a better exchange rate are people who have in-depth knowledge of the workings of blockchain technology.
These are people who have the tech skills to build apps and programs and leverage them against the power and security of these two platforms. For the average investor, however, who has no knowledge of security protocols, these are complex platforms that they can barely understand.
There is also the issue of speed. It is an open secret that using Bitcoin or Ethereum is very slow. In fact, other than the slow speed, when using Bitcoin, you do not have complete certainty that your transactions will terminate.
It gets even worse when you are carrying out very big transactions. A good blockchain platform should allow you the confidence of knowing that your transactions are safe, and there is no risk of cancellation, which does not just increase the risk of fraud, but also ends up in major delays.
Energy intensity is another problem that is common with Bitcoin. Mining coins mean there has to be a spend on electricity. Spending on electricity essentially draws resources out of the blockchain ecosystem, and this goes against the primary concept of making life better through blockchain technology. Spending on electricity also means the blockchain platform becomes expensive in the long run, and the costs eventually have to be passed down to someone.
How does Stellar solve the problem?
Speed is one of the areas where Stellar is thriving. This has been a problem with most of the other blockchain platforms. Stellar can handle thousands of transactions per second. As more nodes are added to the network, the capacity to handle more transactions increases. Therefore, there is virtually no real upper bound limit for the number of transactions you can run per second on Stellar.
What this means is that when using Stellar, you can perform your transactions while enjoying the security features you would enjoy on Bitcoin, but at incredible speeds.
As part of the distributed system, Stellar has a built-in exchange (SDEX). In this exchange users can trade in assets, also at the same speed, you expect transactions.
Compared to most of the blockchain platforms, Stellar has a robust and rich development platform that is more mature than what you would find in most cryptocurrencies. Stellar has several SDKs, available in multiple languages, and the documentation that supports the SDKs is mature and thorough.
Through the SDEX, you can transfer currencies across international borders.
For example, for you to transact money between banks, the banks must use a communication network that either works or is accepted in their country, like SWIFT, or they might have to use a courier service. For this to work, the banks must have a trust line with one another and accept the respective currencies.
This process involves a lot of fees and transaction delays. Delays in the banking system are often attributed to a lot of things, including the presence of intermediaries. On the SDEX, however, the banks will trade in multiple currencies between themselves directly, doing away with costly intermediaries.
This system uses lumens, native assets on the Stellar network, or a means of value transfer. Lumens are important because they can be used to bridge transfers, especially when there are no active buyers or sellers on the exchange in the currency selected at that moment. Therefore, lumens are an intermediate currency that both banks trust and can be used to transfer value between the assets.
What makes Stellar better than the competitors?
The Stellar network has an automatic cryptocurrency exchange. This makes it easier for users to make transactions across borders. What this means is that users are able to exchange fiat currency and cryptocurrency at the same time. To do this, the user defines the desired output.
Stellar is not built around mining. Mining is an expensive feature in blockchain technology. Besides, the problem with mining is the uncertainty in the market especially when the network runs out of mineable tokens.
Most altcoins currently struggle to generate confidence in their ecosystems. However, this is one area where Stellar is already winning. With brands like Deloitte and IBM coming on board, this is the confidence boost that Stellar needs, and sets it a cut above the rest. More than 30 banks all over the world are already using Stellar which makes it a ripe investment opportunity.
IBM created a market for carbon credits, which use the Stellar Lumens and are used on the Stellar blockchain. With this, they were able to encourage the partner banks to adopt not just the Stellar technology, but also their tokens in carrying out international transactions. What Stellar has managed to do, therefore, is to offer the flexibility and good features that are unique to Ethereum and Bitcoin respectively.
Here’s a brief comparison between Stellar and some of the major blockchain networks. While other blockchains will take between 15 minutes and one hour to confirm transactions, Stellar does it in 3 – 5 seconds. On average, you will spend anywhere from $0.3 to around $5.45 on every transaction on other networks. On the other hand, $0.01 pays for 300,000 transactions on Stellar, which makes it virtually free.
Other networks use Prof of Work consensus, performing less than 10 transactions per second. Stellar uses the Stellar Consensus Protocol (SCP) and can handle thousands of transactions per second.
Just like Bitcoin, Stellar is a decentralized blockchain. However, it goes a step further and allows users to carry out transactions faster, cheaper, and in a reliable manner. Stellar users can also create their own decentralized apps. Coupled with the fact that this highly scalable blockchain can handle more transactions per second than Bitcoin, there certainly is no letting up.
How can Stellar be categorized?
Stellar is a remittance cryptocurrency. It is a platform where banks, payment systems, and people are brought together to enable them to move money faster and at the least possible cost.
This is something that has been a challenge in the past, especially for those who are considered unbanked or underbanked in the society. Through Stellar, it is possible to bring the world and benefits of banking to a population that had previously been marginalized.
What is Stellar’s vision on Security?
Lumens are used in the Stellar blockchain as an intermediary currency and a transfer of value between transacting parties. However, lumens also have a secondary role in the blockchain, as a security feature. Lumens are used as an anti-spam feature on the network.
Any transaction that is carried out on the lumen network attracts a small fee. In so doing, Stellar mitigates Denial of Service (DoS) attacks by limiting the number of fake transactions that might be used to flood the system.
The security concept in Stellar is all about simplicity. In fact, the simplicity around the transaction model used in Stellar is built with the promise of as few problems as possible. This helps to make the transactions on Stellar more secure, especially for applications that do not need the generality of smart contracts.
Stellar uses an atomic multi-operation for all transactions, and this translates to code that can be fully audited. This also does away with the risk of uncertainty and reduces the prospect of attacks from frauds who would want to exploit any vulnerabilities in the ecosystem.
Stellar users have the freedom to freeze their coins should they suspect an anomaly in their accounts. This is a good thing because it makes it easier to recover accounts without having to rely on validators to execute an irregular change of state to help such users recover their accounts.
Another genius security feature in Stellar is that the users have the choice of choosing the nodes that they can use to validate their transactions. This is a good option, especially in the case where there might be an element of malice from some of the validators in the ecosystem. It is also a safe option in case the assets in question cannot be double-redeemed. Case in point, an example of precious stones like gold. If this was being exchanged on Bitcoin or Ethereum, it is possible that one of the validators might create confusion and risk double-redemption. However, in Stellar, the owners can select pre-select validators, especially those who have a version of their token they deem legitimate.
Examples of Stellar use cases/applications
There are two main benefits that you enjoy when using Stellar, the chance to gain new customers, and reducing your transaction costs.
Cost of transaction
Through Stellar, entities spend less on micropayments. By reducing the cost of micro-transactions, they are able to offer incremental payment plans to their customers. This is a model that has been effected by Deloitte, one of the largest financial consulting firms in the world.
In 4 weeks since joining Stellar, Deloitte had reduced their transaction costs by 40%, with transactions resolving in 5 seconds. For a fraction of a cent, you can send money between countries so fast, and the remittances attract very low costs especially when transacting between different currencies.
Mobile money transfers have also benefitted from Stellar, making the platforms interoperable. This allows customers to send and receive mobile money from different service providers. The low cost of transaction has also made Stellar a viable option for NGOs and other entities involved in social enterprises and projects, by effecting social change through low-cost financial services.