Cryptocurrencies were built to fulfil the shortcomings of the current financial system. But to accomplish that, some believe traditional institutions such as banks and payment portals need to be included in the new system to build a financial utopia.
It is with this belief that Stellar was created—to bridge the gap between the problematic present and the innovative future. Discover today how Stellar accomplishes this with its avant-garde approach to connect banks and financial institutions to the average individual.
What is Stellar?
Stellar is an open-source network that allows individuals to make borderless transactions. It was created in 2015 with the purpose of becoming a global financial network where money can flow and reach across borders more efficiently.
By serving as the link between payment infrastructures, businesses and individuals, the Stellar network allows instantaneous and cheap transactions all over the world. There’s no need to pay accumulated fees and wait a few business days before the sent funds are received.
The decentralized payments network makes this possible through tokenization and its native token called Lumens (XLM). To make currencies more travel-friendly, users can convert any currency into Lumens or currency tokens so it can pass through the network seamlessly.
But unlike banks and other financial institutions, Stellar is not governed by anyone. The network is built on top of a blockchain where all transactions are recorded publicly.
Stellar vs Ripple
If Stellar sounds a lot like Ripple XRP, that’s because they have a similar purpose. Both networks aim to integrate traditional financial systems to the modern crypto space and make efficient transactions possible.
Additionally, both Ripple and Stellar were developed by one of their co-founders Jeb McCaleb. But unlike Ripple XRP which is controlled by RippleLabs, Stellar is supported by the non-profit organization Stellar.org.
Notable features of Stellar
One unique feature Stellar has is tokenization which lets users convert currencies or assets into tokens. For example, dollars can be converted into dollar tokens. Both are worth exactly the same price but through tokenization, you can convert your dollar token into other currency tokens such as yen or peso. If you want to cash out your money, you can simply convert it back to the fiat currency you want.
Seamless and hassle-free, Stellar’s tokenization feature creates a more conducive environment where currencies and assets can be exchanged instantaneously and without costing a pretty penny.
Moreover, you can turn assets, contracts or real estate investments into the token of your choice! This broadens the possibilities even more.
People don’t need to look further for a platform to convert and exchange their fiat currencies into tokens because the Stellar network already comes with a peer-to-peer trading platform called StellarX. It’s a third-party client built on top of the open marketplace in Stellar.
With this, users can directly exchange any token they hold for another token or currency. However, it’s not an exchange site since there are no order books on the site so you can only purchase coins offered by individual sellers.
StellarX prides itself on being the first decentralized crypto exchange with global fiat gateways. Through this exchange, not only can you buy cryptocurrencies with your fiat money but you can also convert it into a different fiat currency. No middleman stands in the way of your peer-to-peer transaction.
The peer-to-peer exchange gives full control to the users. StellarX does not hold any assets or private keys so you’re in complete control of your assets.
Stellar Consensus Protocol
Since McCaleb worked on both Ripple and Stellar, the two networks have a similar consensus algorithm that ensures the legitimacy of every transaction. Ripple uses the Byzantine Consensus Algorithm which consists of a network of nodes that need to reach a an agreement. However, the node networks are controlled by RippleLabs instead of being decentralized.
To fix this shortcoming, the Stellar team polished the previous mechanism and created Stellar Consensus Protocol or SCP. It works similar to Ripple’s consensus algorithm but instead of relying on a set of predetermined nodes, the SCP works independently.
In SCP, the task of validating transactions falls only to a select few nodes rather than a whole network. Since the transaction only needs to pass through a smaller number of nodes, it is processed at a faster rate.
Stellar Lumens (XLM)
While Stellar and Lumens are usually interchangeable, they are actually different. Stellar is the blockchain network where transactions are done whereas Lumens is the native token that runs on the network represented by the symbol XLM.
To transfer assets in the Stellar network, you’ll need Lumens to pay the minimum fee of 0.00001 XLM. This cheap fee makes Stellar the ideal network to make microtransactions that can be done in under 5 seconds.
Lumens acts as the universal currency in the network. Malleable and flexible, fiat currencies can be converted into Lumens that can then be converted into any currency or asset you want.
Unlike most cryptocurrencies, Lumens isn’t mined or produced. A set number of 100 billion Lumens were already created when the network officially launched in 2014. But in October 2019, the Stellar Development Foundation destroyed half of Lumen’s total supply after the community vote agreed that there was no need for such a great number of coins in supply. And so, its supply is now reduced to 50 billion. Today, over 22 billion XLM are circulating the market and it currently sits at the top 9 of the Coin Market Cap list.
Where to buy and store Stellar Lumens
Since Stellar Lumens is currently one of the top cryptocurrencies in the crypto space, it’s listed in major exchanges today. Below are some of the most notable crypto exchanges where you can buy XLM in a snap:
Once you’ve bought your Lumens, you need to store them in a safe wallet. Below are a few of the best hot and cold wallets where you can safely store your Lumens:
- Guarda Wallet
- Ledger Nano S
- Atomic Wallet
Stellar: The future of finance
Stellar drives innovation not just of cryptocurrencies but of the whole financial system. And with its groundbreaking technology and practical uses, Stellar will only continue to blaze its own path in the financial world, paving a road for others to follow.
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