A Guide to Trustlines on Stellar
Stellar lets you trade, hold, and transfer any type of asset on the network. If you can tokenize it, you can issue it on Stellar (e.g. dollars, cryptocurrencies, barrels of monkeys, etc.). In this post I’ll make the world of Stellar assets and trustlines easier to navigate.
Anchors
Central to Stellar is the concept of an anchor. Anchors can be individuals or entities (like a bank) that issue assets on Stellar. Anchors take deposits of a real world asset, turn them into a token balance on Stellar, and honor withdrawals for the tokens they issue.
Anchor deposits function like Venmo, PayPal, or any other payment app. Payment apps take deposits from users, give them an equal balance within the app, and allow users to withdraw their balances. Stellar anchors mirror this by taking deposits from users. Though instead of issuing balances in a centralized database, they are issuing token balances on the Stellar ledger. These anchored tokens can then be used with any other application built on Stellar.
One thing to remember is that different entities can issue the same asset. For example, there are several USD anchors on Stellar. It is up to you to choose which anchors/assets you interact with just as you choose which banks and financial services you choose to interact with.
Trustlines
When using a payment service, you are trusting the service provider to store your deposit and to honor your withdrawals. This idea of trust is made explicit on Stellar through trustlines. Trustlines are added to your Stellar account and let you hold a token as well as specify the amount of that token you’re willing to hold. Trustlines also keep you from receiving unwanted assets. For example, you wouldn’t want someone trying to pay you with counterfeit dollars from a person or service you don’t trust.
In order to trade, receive, or hold any asset on the Stellar network you must first establish a trustline with the anchor’s issuing account. An issuing account is an anchor’s Stellar account that created the asset. Trustlines are set using the Change Trust operation and cost a base reserve fee of 0.5 lumens each. What this means is that for each trustline you set, your account will be required to maintain 0.5 lumens in reserve that can’t be spent until you close your trustlines.
If the technical details sound complex don’t worry, most wallets hide most of this stuff and make adding trustlines as easy as a few clicks. Though it may be easy to add trust lines, only interact with assets that you have done your research on. Many interfaces (e.g. StellarX) provide information about anchors. You can also check out their associated websites and look for reputation within the ecosystem. Ultimately how you choose to trust anchors is up to you. Don’t blindly trust assets.
Setting a Trustline
In order to fully understand the concept, I’ll walk through the process of setting up a trustline. For this example I’ll be using my Keybase Stellar Wallet.
I already have a trustline for U.S. Dollars (from AnchorUSD), but I’ve also decided I would like to be able to receive Euros (EURT) issued by Tempo.
To do this, I can go to the wallet settings tab where there is a list of my existing trustlines. Then I can add a trustline by clicking ‘Manage trustlines’.
This will give me a search window that allows me to search all of the assets issued on Stellar. In this case, I’m looking for Euros issued by Tempo, so I will search for the Euro.
After finding the token and issuer that I’m looking for, I can click ‘Accept’ to set the trustline. Now after returning to my wallet balance, I should see EURT added. Setting this trustline will also automatically add 0.5 lumens to my reserve balance.
It’s as easy as that! I can now trade, store, send, and receive EURT from anyone on the network. If I were a citizen in the eurozone, I could create an account with Tempo and withdraw these Euro tokens directly to my bank account.
An important note is that this trustline is for one specific issuer. If I were to find another service that I trust who also issues Euros on Stellar, I would have to go through this process again and create a seperate trustline.
If you have any further questions feel free to head over to our public Keybase team!
