What is Stellar?
The use of crypto for cross-border payments
In the world of constant news about the impact of the latest, most lucrative cryptocurrency entering the market it can be easy to overlook noteworthy ventures that offer something different. Stellar is one of them. Founded in 2014 as a protocol supported by a non-profit, Stellar’s social mission is to “provide financial services to the unbanked”. International money transfers done the traditional way are slow, complicated and costly for both parties. Broadly speaking, the aim is to reduce costs of micropayments and remittance.
You may ask yourself what makes Stellar so unique, as Bitcoin, Ethereum, or any other cryptocurrency for that matter can be sent transnationally via a decentralized process and hereafter transferred into fiat money. While this is true, one of Stellar’s building stones is to learn from, and fix issues such as speed and scalability that hold Bitcoin back. Firstly, Stellar operates differently to blockchain, on a basis of a different consensus mechanism to validate transactions, the Stellar Consensus Protocol, made of nodes that add to agreement by validating a variety of transactions forming a network that has mutual trust and leads to a consensus every 2–5 seconds.
Stellar is developed to lessen risks related to foreign exchanges that manifest themselves in increased costs.
Stellar uses Lumens as the native asset which can act as a bridge currency and value transmitter in exchange relationships. For instance, payments to an individual in India can be made excluding the middle man (a US bank and the Bank of India, or an appropriate financial institution), resulting in a fast and seamless process. This gives Stellar advantage over the traditional system, where processing of up to 1000 transactions can be done within a second with a negligible fee of 0.00001 lumens to impede fraud. Stellar is developed to lessen risks related to foreign exchanges that manifest themselves in increased costs. Additionally, it does not serve only as a decentralised exchange or cross-asset payment platform, but also as a complex global asset-transfer marketplace. Unlike Bitcoin however, there is no scarcity as there are 10 billion Lumens and which encumbers the accuracy of the coin’s future value and growth prognosis.
All in all, Stellar’s objective to facilitate payments across borders and enable access to financial services to the unbanked in a decentralised way advances frontiers and opens up a different perspective to perceive the application of blockchain. The fact that IBM, previously relying on its own blockchain solutions decided to partner up with Stellar for cross-border payments in the South Pacific and declared it as a vital component of the firm’s future strategy make this cryptocurrency worth keeping an eye on.
Sources:
https://www.coindesk.com/ibms-stellar-move-tech-giant-use-lumen-cryptocurrency-payments-rail/
