We are happy to announce our partnership with the Stellar Development Foundation (SDF). Starting with our next major release, we will use Stellar as the underlying cryptocurrency ledger of our nanopayment system. Stellar.org will generously credit each of our users 500 lumens. Yay!
A few months ago it became evident that Bitcoin’s original vision of a peer-to-peer electronic cash system is no longer viable for everyday transactions. Due to its wild success, stalling scalability measures and the subsequent network congestions, minimum amounts that can be sent over the Bitcoin network and transaction fees rose from under a cent to several EUR/USD per transaction. For SatoshiPay this meant we could no longer wait for Bitcoin to scale, but needed to look for a new blockchain or distributed ledger to migrate our nanopayment system to.
We looked at different options that are suitable for micropayments at our expected scale, did thorough due diligence and tested extensively for current production readiness — and concluded to make Stellar our default ledger.
Jed McCaleb, cofounder of Stellar.org on our decision and joint vision:
“We’re excited that SatoshiPay has selected Stellar as its primary ledger technology and look forward to inviting SatoshiPay users to the Stellar community. Cryptocurrencies and blockchain technology are facilitating open innovation and revolutionizing the payments space, and we’re thrilled to be working with SatoshiPay to help lead the way by making micropayments much faster and less costly than ever before.”
The Stellar advantage
As a ledger that does not use resource-intensive proof-of-work calculations to secure transactions, Stellar offers extremely low fees (currently around 0.00003 cents per operation) and fast settlements (around 5s to final confirmation). Apart from these performance benefits, we found Stellar to be very developer friendly and stable. Everything is well documented, works as expected and the software ecosystem is mature.
Stellar also sports native asset token support, distributed exchange features and allows transactions to be routed through different currencies. On top of that there is a sophisticated multi-signature account architecture, time locks and batched operations — which enable simple smart contracts. This is ideal for our needs, and thanks to Stellar’s own version of the “Keep it simple, stupid” principle, it’s all easy to plug together.
Because in Stellar there is no mining or other verification work that might consume plenty of energy, server infrastructure to run the network is minimal and in terms of CO2 footprint it can be considered very environmentally friendly, especially when compared to proof-of-work based blockchains like Bitcoin or Ethereum.
We feel that apart from the solid technical advantages, SDF is without doubt also a very powerful and well connected business partner: Founded in 2014, Stellar.org is headquartered in San Francisco and received initial funding by the credit card payment processor Stripe. IBM recently announced to use Stellar in their blockchain banking platform. Stellar’s cryptocurrency Lumen currently has a market cap of €480m.
How SatoshiPay uses Stellar
Starting in 2018, all of our cryptocurrency transactions will be made via the Stellar network. Initially we will use Stellar’s native currency Lumen to transact funds, but together with partners we are currently exploring the future use of other, less volatile asset tokens on the Stellar network.
In Bitcoin we used micropayment channels to save transaction fees and to speed up payments. Channels delayed payouts to publishers to up to a week. Because all Stellar transactions are final within seconds and cost next to nothing, we no longer need payment channels and will for the first time be able to settle all transactions in real-time and directly on the distributed ledger. This means now a publisher will irreversibly receive funds to their Stellar account within seconds after a consumer pays for content — true peer-to-peer nanopayments.
We will continue to generate the private keys that control consumer funds on the consumer’s device and never submit them to our servers, meaning we never directly control consumer funds, but merely act as a transaction broker. This also means that consumers still don’t need to create a login with us — one barrier to adoption less.
500 free lumens for each SatoshiPay user
Part of SDF’s mission is to support the growth of the Stellar network and the ecosystem around it. SDF has therefore generously pledged to credit each of our users 500 lumens when creating a wallet through us. Lumens (short “XLM”) are the native currency of the Stellar network and 500 XLM are worth around €14 at time of writing.
SDF has agreed to grant these free lumens to our first 100,000 users, with an option to extend the program to more users later. Correct, at current XLM exchange rate this is over €1m in free credit to SatoshiPay users, and some guaranteed income for our publishers through content payments resulting from that. This is absolutely HUGE!
Multiple ledger support
I met Anthony Barker, CTO of TEMPO at a conference in Odessa earlier this year and spoke to him about their blockchain-based remittance service. When I asked him what ledger they use, I was surprised to find out that they decide on a ledger depending on the economics involved for each remittance corridor. I understand that they use Stellar, but also Bitcoin and even legacy payment networks in some cases — whatever is the best tool for the job. This makes perfect sense from a business point of view, but is not a common approach in the blockchain world. It was an inspiring conversation.
Back in Berlin, our team was already working hard on replacing Bitcoin in our backend, and while planning the software architecture for a switch to a new ledger technology, it became evident that hardwiring a new cryptocurrency to our updated system would be a little short-sighted. Instead, we started abstracting all cryptocurrency ledger operations — like wallet creation, balance queries and payments — into a layer between our business logic and the underlying ledger. Using this layered approach, the switch from one default ledger to another will become relatively easy and we are not locked into a specific ledger or blockchain.
Multiple ledger support will also allow us to use different ledgers depending on the requirements of large corporate clients or industry verticals of our nanopayment settlement platform. This is where our long-term partnership with IOTA comes in. While we didn’t pick IOTA as the default ledger for our web content payment product, we will continue to evaluate IOTA for upcoming products, for example for white-label solutions or in the Internet of things sector.
What does this mean for SatoshiPay?
We are glad to have the Stellar network as a reliable ledger and the SDF as a strong partner in bringing us forward. After being busy implementing a new ledger technology, we can soon fully focus on our core business and work on user experience improvements to bring nanopayments to the masses. We feel well equipped for a year of strong growth in 2018.
We are currently working very hard on making our product ready for a mainstream launch in December 2017. Apart from Stellar as our default ledger technology, more payment methods will be available for top-up, we will introduce a streamlined user interface and have exciting content partnerships to announce.
To celebrate our launch we will organise events on 7 December in Berlin and 12 December in London. We will release more details about these events shortly! Follow us on Twitter to stay up-to-date.
Meinhard Benn, CEO at SatoshiPay