What is Stellar Blockchain?

Stellar is a decentralized, open-source platform that enables fast, secure, and low-cost cross-border transactions. The Stellar network was founded in 2014 by Jed McCaleb and Joyce Kim, and its mission is to promote financial access and inclusion by enabling individuals and organizations to move money across borders quickly and cheaply. 

What is Stellar Blockchain?

Stellar is a decentralized, open-source platform that enables fast, secure, and low-cost cross-border transactions. It is a distributed ledger technology (DLT) that operates on a network of independent nodes and is designed to facilitate the exchange of money and assets across borders.

• The Stellar network uses its own cryptocurrency, called Lumens (XLM), as a bridge between different currencies, allowing users to convert between different currencies in real-time. 
• Stellar’s key features include fast transactions, low costs, cross-currency conversions, anchors, smart contracts, and scalability, making it a popular solution for individuals and organizations that need to move money across borders. 
• The goal of Stellar is to promote financial access and inclusion by enabling people to move money quickly and cheaply, regardless of their location or currency.

History of Stellar

Stellar was founded in 2014 by Jed McCaleb and Joyce Kim. McCaleb was one of the co-founders of Mt. Gox, the first bitcoin exchange, and had previously worked on the Ripple payment protocol. He and Kim saw an opportunity to create a more accessible and efficient cross-border payment platform that would be open source, decentralized, and based on blockchain technology.

• The Stellar network was officially launched in 2015, with 100 billion Lumens (XLM) being created in the genesis block. 
• In 2016, Stellar formed a partnership with IBM to explore the use of blockchain technology for cross-border payments. 
• This partnership helped to drive the growth and adoption of the Stellar network and led to the creation of the IBM Blockchain World Wire, a cross-border payment platform based on Stellar.
• Over the next few years, Stellar continued to grow and expand its network. It established partnerships with major financial institutions, such as Deloitte, Stronghold, and Tempo, and launched several initiatives to promote financial access and inclusion, such as the Stellar Lumens (XLM) airdrops.

Today, Stellar is one of the largest decentralized platforms for cross-border payments, with a growing network of users, partners, and developers. Its goal is to provide a fast, secure, and affordable solution for moving money across borders, and to promote financial access and inclusion for people around the world.

How Stellar Blockchain Works?

• Stellar works by enabling fast, secure, and low-cost cross-border transactions between users on its network. It runs on an open-source, decentralized platform built on blockchain technology. A network of independent nodes that collaborate to validate and process transactions makes up the Stellar network.
• When a user wants to send money to another user on the Stellar network, the transaction is broadcast to the network. The transaction is then validated by the nodes on the network, who use a consensus algorithm to reach an agreement on the validity of the transaction. The monies are transferred from the sender’s account to the recipient’s account after the transaction has been verified and added to the blockchain.
• One of the key features of Stellar is its use of Lumens (XLM), its native cryptocurrency, as a bridge between different currencies. This means that users can convert between different currencies in real-time, making it possible to send money to another user on the network in their own currency, even if they are located in a different country. The conversion is done automatically by the network, using a system of anchors that hold balances in different currencies.
• Another key feature of Stellar is its support for smart contracts. Smart contracts are self-executing contracts that automatically enforce the terms of an agreement between two parties. This makes it possible to automate complex financial transactions, such as escrow agreements and conditional payments, on the Stellar network.
• The combination of fast transactions, low costs, cross-currency conversions, anchors, smart contracts, and scalability make Stellar an attractive solution for individuals and organizations that need to move money across borders. Its goal is to promote financial access and inclusion by enabling people to move money quickly and cheaply, regardless of their location or currency.

Transactions on Stellar Blockchain

Below are the three notable transactions on the stellar blockchain:

1. Indirect transactions: Stellar lumens can facilitate indirect transactions and the exchange finds individuals who want a specific currency in return for Lumens. 
2. Peer-to-Peer transactions: Peer-to-Peer transactions follow the order book model and involve the distributed exchange finding the right buyer/ seller pair. 
3. Indirect chain conversion: Indirect chain conversion works when the other types of transactions fail. They start by exchanging USD for another currency which is then converted into other currencies before converting it into Euros.

Features of Stellar Blockchain

• Smart Contracts: Smart contracts, which are self-executing contracts with the terms of the agreement put directly into code, are supported by Stellar. On the Stellar platform, this makes it possible for developers to create decentralized apps (dApps).
• Decentralized Network: Stellar is a decentralized network, which means that it is not owned or controlled by any single entity. This ensures that the platform is secure, transparent, and resistant to censorship.
• Fast Transactions: Stellar is designed to enable fast and efficient cross-border transactions, with the average transaction time being just a few seconds.
• Low Cost: Stellar is designed to be an affordable platform for cross-border transactions, with transaction fees being a fraction of a cent. This makes it an attractive option for individuals and organizations that need to move money across borders regularly.
• Cross-Currency Conversions: Stellar allows users to convert between different currencies in real-time, making it easy to move money between different countries and currencies.
• Anchors: Stellar uses a network of trusted entities called anchors, which act as gateways to the traditional financial system. This allows users to deposit and withdraw money in their local currency and enables the Stellar network to support a wide range of fiat currencies.
• Scalability: Stellar is designed to be scalable, which means that it can handle a large number of transactions per second. This is important for a platform that aims to support global cross-border transactions.

Economy of Stellar

• The economy of Stellar is based on its native cryptocurrency, Lumens (XLM). The Lumens are used as a bridge between different currencies, allowing for fast and low-cost transactions between different currencies on the network. The Lumens also serve as an anti-spam measure, as transactions on the network require a small fee in Lumens.
• The total supply of Lumens is capped at 50 billion, with about half of the supply currently in circulation. The distribution of Lumens was designed to promote financial inclusion, with a significant portion of the supply being distributed through a series of airdrops and grants.
• In terms of market dynamics, the value of Lumens is determined by supply and demand, like any other cryptocurrency. The value of Lumens can be influenced by a variety of factors, including adoption and use of the network, partnerships and integrations with other companies, and overall market sentiment towards cryptocurrency.
• The Stellar network is designed to be inflationary, with a small amount of Lumens being added to the network each year. This is designed to compensate for lost or damaged Lumens and to ensure the long-term health of the network. The rate of inflation is currently 1% per year and is set to decrease over time.
• Overall, the economy of Stellar is based on its native cryptocurrency, Lumens, and is designed to promote financial inclusion and support fast, low-cost transactions between different currencies on the network.

Use Case of Stellar Blockchain

Stellar has a variety of use cases, including:

1. Cross-border Payments

One of the primary use cases for Stellar is cross-border payments. Its fast, secure, and low-cost transactions make it an attractive solution for individuals and businesses that need to move money across borders. The use of Lumens (XLM) as a bridge between different currencies makes it possible to convert between different currencies in real-time, making it easier to send and receive money in the currency of your choice, regardless of your location or the currency of the recipient.

2. Remittances

Stellar can be used to process remittances or the sending of money from one country to another. Its fast and low-cost transactions make it an attractive solution for individuals and families that need to send money to loved ones in other countries.

3. Microfinance

Stellar can be used to provide financial services to underbanked and unbanked populations. Its low-cost transactions and support for smart contracts make it possible to automate complex financial transactions, such as loans and savings programs, on the network.

4. Supply Chain Management

Stellar can be used to manage supply chains, enabling fast, secure, and low-cost transactions between suppliers, manufacturers, and distributors. Its support for smart contracts makes it possible to automate complex supply chain transactions, such as purchase orders and invoices, on the network.

5. Tokenization

Stellar can be used to tokenize assets, such as stocks, real estate, and commodities, making it possible to trade these assets on the network. This opens up new opportunities for investment and financial inclusion, as it makes it easier to trade and transfer ownership of assets in a fast, secure, and low-cost manner.

Benefits of Stellar

• Speed and Efficiency: Transactions on the Stellar network are processed in just a few seconds, making it much faster than traditional cross-border payment methods. This speed and efficiency make it an attractive solution for businesses and individuals that need to move money quickly.
• Low Costs: Stellar is intended to be an affordable option for international payments. The network offers a cheap alternative for consumers and companies of all sizes because transactions are handled there for a fraction of the price of using conventional techniques.
• Cross-Currency Conversions: The use of Lumens (XLM) as a bridge between different currencies makes it possible to convert between different currencies in real-time on the Stellar network. This makes it easier for users to send and receive money in their own currency, regardless of their location or the currency of the recipient.
• Decentralization: Stellar runs on a network of independent nodes that cooperate to validate and process transactions, making it a decentralized platform. Compared to centralized systems, it is therefore more secure and immune to censorship and meddling.
• Smart Contracts: Smart contracts, which are self-executing contracts that uphold the terms of a contract between two parties, are supported by Stellar. As a result, intricate financial transactions on the network, like escrow contracts and conditional payments, can now be automated.

Limitations of Stellar 

• Scalability: Although Stellar has made progress in improving its scalability, it is still limited by the capacity of its network. This means that during periods of high demand, the network may experience slower performance, making it less suitable for large-scale transactions.
• Adoption: Stellar is still in the early stages of adoption, and its network is not as large or well-established as other blockchain platforms. This means that its user base and ecosystem are not as mature, and there may be limited use cases for the platform at present.
• Liquidity: While the use of Lumens (XLM) as a bridge between different currencies makes it possible to convert between different currencies in real-time, the liquidity of the platform may still be limited in certain regions or for certain currencies. This may make it more difficult to convert between certain currencies on the network, particularly during periods of high demand.

Future Scope of Stellar

The future of Stellar holds a lot of promise, as it continues to gain traction as a low-cost and fast payment solution for a variety of use cases. Some of the areas where Stellar is expected to see growth in the future include:

• Expansion of Cross-border Payments: As more individuals and businesses discover the benefits of fast, low-cost, and secure cross-border payments, Stellar is expected to see continued growth in this area.
• Increased Adoption of Lumens: As more individuals and businesses discover the benefits of using Lumens (XLM) as a bridge between different currencies, its adoption is expected to grow. This is particularly true in countries where traditional payment methods are slow, expensive, or unreliable.
• Tokenization of Assets: The tokenization of assets is expected to continue to grow, as more individuals and businesses discover the benefits of trading and transferring ownership of assets on the network. This is expected to open up new investment opportunities and enable financial inclusion for populations that have been previously excluded from traditional financial services.
• Integration with Traditional Financial Services: As more traditional financial services providers discover the benefits of integrating with Stellar, its adoption is expected to grow. This is expected to result in increased access to financial services for individuals and businesses, and could also lead to the creation of new financial products and services.