CryptoBasics: Stellar

Background

Stellar is an open-source, fully distributed network that aims to enable anyone to seamlessly make international payments, cross-border transactions, and transfers of value. While it is first and foremost a crypto platform, Stellar also has a nonprofit arm, the Stellar Development Foundation, whose stated goal is to give everyone easy access to banking services, even to those who are presently unbanked.

The Stellar platform originated from a hard fork of Ripple (XRP) that occurred in 2014, and is run on a hybrid blockchain. Its currency is the lumen (or XLM), which has a total supply of 100 billion lumens on the network (presently around 18 billion are in circulation). Transaction fees for Stellar are minimal, with a fee of just 0.00001 XLM per transaction.

Team Members

Stellar was jointly founded by Joyce Kim and serial crypto entrepreneur Jed McCaleb in early 2014. While McCaleb remains an active developer on the project, Kim has transitioned into being an active board member within the organization.

Stellar’s development team consists of 5-10 core developers, as well as an active open-source development community.

The group also has a distinguished board of eight advisors – ranging from Stripe CEO Patrick Collison, to Sam Altman, President of Y Combinator.

What is Stellar?

Stellar’s platform is fully distributed, open-source, and decentralized. Their decentralized servers around the world drive the platform’s distributed ledger, which records all transactions on the blockchain for transparency.

The network also has its own unique consensus methodology that keeps the platform decentralized and improves performance.

Lumens are the Stellar network’s native asset. As of February 2018, Stellar (XLM) was the 7th largest cryptocurrency in the world, with a market capitalization of over $6.4 billion and over 18 billion XLM presently in circulation.

The Stellar network also has a fixed lumen inflation rate of 1% annually. Lumens can be held in a variety of different wallets, and are also supported by most hardware wallets as well.

The Stellar organization has explicitly stated its primary goal is not profit, and that it wants to focus on bringing the unbanked “online” while making the Stellar platform critical to performing value transfers in developing markets, particularly when cross-border transactions are involved.

This piece of the organization’s vision is unique from most other cryptocurrencies, and it’s a primary driver of the group’s development roadmap as well.

Technology

The Stellar platform distinguishes itself from other cryptocurrency platforms by being incredibly efficient. While Ethereum takes around 3 minutes to complete and verify a transaction, Stellar takes around ~5 seconds to settle a transaction. This is because Stellar’s decentralized servers are constantly syncing, which builds consensus every few seconds (reference this white paper on the Stellar Consensus Protocol for the full technical breakdown).

The Stellar Consensus Protocol is a key differentiator that separates the platform from Bitcoin, which uses proof-of-work to establish consensus. As such, that means there is also no incentive to do mining on the platform, since prospective miners would not be rewarded with additional lumens for their efforts.

Stellar’s protocol is also more cryptographically secure, and addresses many of the security concerns that experts still have about Bitcoin and similar platforms.

To facilitate the transferring of fiat currencies on the network, Stellar uses “anchors” to mediate between fiat currency accounts and the ledgers for each individual user. This ensures that users’ wallets and the account details held on the Stellar network are kept in sync.

When a user deposits fiat currency into their account, Stellar’s anchors will automatically ensure that the correct Stellar network asset is also deposited into the user’s wallet.

Stellar’s infrastructure makes launching ICOs incredibly easy, and the platform is poised to become a major player in the ICO space during the upcoming year. Most tokens can be created in just hours, and the process for launching an ICO on Stellar is more streamlined than on most other platforms.

Notable ICOs that are either pending or already complete include messaging service Kik, Mobius Network, and the Nigerian remittances firm SureRemit.

Future Plans

Partnerships are key to Stellar’s future plans. The organization recently inked a partnership with IBM to pilot its technology for cross-border payments. Settlement of payments will be conducted on the Stellar network, while the actual transaction clearing will be handled by IBM’s in-house blockchain solutions.

Presently, the pilot program is limited to a select number of currencies, but both parties are watching the results closely and hope to expand the program in the future.

In 2018, Stellar will be looking to accelerate the growth of its Partnership Grant Program, and is now offering up to $2M USD to grant recipients who are working on innovative, business-based use cases for the Stellar platform.

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