Stellar and the $10 Trillion Economy

Now that the initial launch excitement of Stellar has receded (although they’re still seeing an incredible volume of new signups), the question becomes: Who will be the first to build meaningful products on top of this new network?

I’ve argued that the initial excitement missed an important point: Stellar is not a currency, it’s a postage stamp. Although stamps do have value in their own right, you don’t buy them to act as a store of value. You buy them because of what they let you do (send packages).

So what will we do with our postage stamps?

The first wave of products won’t look altogether different from the rest of the cryptocurrency ecosystem. Stellar will be baked into existing exchanges, originally in order to buy/sell Stellar, but eventually in its intended role of helping to move value around the financial ecosystem.

The second wave will look different from anything we’ve seen in cryptocurrencies so far. This second wave will happen quietly, at the underserved edges of our financial infrastructure. It will happen slowly, and won’t be covered in the tech press or on Good Morning America. It won’t be venture backed and built in a Palo Alto garage.

There’s a French phrase, “l’economie de la débrouillardise” which refers to the resourceful, resilient, entrepreneurial economy that exists largely at the margins of the global financial infrastructure. Nigerian importers of Chinese electrical generators. Pakistani migrant construction workers sending money home to their families. The emerging “gig economy” in the developed world. By most metrics it is the second biggest economy in the world, with an estimated GDP of $10 trillion.

This economy works because of the informal bonds of trust that exist at the edges of our current financial networks. Stellar is going to knit together those informal trust networks in a way that has never been seen before.

Why? Because Stellar speaks the language of this informal economy. Transactions can move seamlessly between friends or trusted brokers, but don’t require the participation of a distant and monolithic bank. Most importantly, the barriers to transacting via Stellar can one day be as low as the barriers to participation in l’economie de la débrouillardise.

Imagine this: a Brazilian immigrant in Queens sees his friends and family paying $10 in fees for every $100 they send back home. He calls up a friend in Brazil and strikes a deal: they will partner together to handle remittances for their communities. They both establish themselves as gateways on the Stellar network, and extend “trust” to one another, so payments can move seamlessly between the two. All transactions are recorded automatically in the Stellar ledger. Their friends and family signup for Stellar accounts, and pay USD in the US, which end up in Brazil as BRL. Once a week, the two partners “settle up” off network, making a single cross border and cross currency money transfer to balance the previous week’s flow of remittances.

The early parts of this second wave may look a little bit like the early days of microlending, when stakeholders in technology, finance, and nonprofits needed to band together to educate entrepreneurs in the developing world, and empower them to start businesses that had previously been out of their reach. For technologists, our challenge will be taking a complex protocol and making it accessible for nontechnical entrepreneurs (We’re building a small part of that at Yett — want to work with us? Get in touch).

Eventually, however, I expect that the Stellar network will look a little bit like the internet, with plenty of marquee, venture backed names at the center of the ecosystem, and an incredible flowering of creativity and entrepreneurialism at the edge of the network. That’s what will make Stellar more impactful than any financial innovation we’ve ever seen.