What is Stellar

Stellar connects financial institutions to make it easy for people to create, send, and trade digital representations of all forms of money. Stellar's primary emphasis is on growing economies via remittances and bank loans to individuals who do not have access to banking services.

The network allows for a distributed exchange mode, a cross-border transfer and payment system that dramatically links financial entities to lower transaction costs and time delays.

While Stellar functions similarly to technologies such as Bitcoin, its primary differentiating characteristic is its consensus protocol. Stellar's cryptocurrency, the Stellar Lumen (XLM), powers the Stellar payment network.

A Brief History of Stellar

The network was established in 2014 by Jed McCaleb, co-founder of Mt. Gox and Ripple, and former lawyer Joyce Kim. Soon after, Stripe's CEO Patrick Collison collaborated with McCaleb and Kim to create the Stellar Development Foundation (SDF), a non-profit institution that supports the development of Stellar.

During the initial coin offering (ICO), the project raised US$39 million and deployed 100 billion lumens (originally called stellars), with an annual inflation rate of 1%.

Stellar was the subject of a contentious token burn in November 2019. Over 50 billion XLM was subject to a burn. That day, about half of the world's XLM supply vanished from the Stellar ledger, resulting in a price explosion that saw the currency increase by more than 25% in only 48 hours.

The platform obtained almost 3 million users in its first year, and its market cap rose to around $15 million.

How Stellar Works

The essential operation of Stellar is similar to that of other decentralised payment technologies. It maintains a network of decentralised servers with a distributed ledger that is updated across all nodes every 2 to 5 seconds. The consensus protocol is the only noticeable difference between Stellar and Bitcoin.

The Stellar consensus protocol (SCP) does not need the entire miner network to approve transactions. Instead, it employs the federated Byzantine agreement (FBA) algorithm, allowing faster transaction processing. It employs quorum slices (or a piece of the network) to approve and validate a transaction.

Each Stellar network node selects a new group of "trustworthy" nodes. A transaction gets authorised after all nodes have approved it in this collection. Stellar's network is now exceptionally fast, processing up to 1,000 network operations per second due to the shortened procedure.

What is Stellar Used for

Stellar allows you to create, send, and trade digital representations of any money. You can transact on dollars, pesos, bitcoin, and pretty much anything else. It is intended for all of the world's financial systems to collaborate on a single network.

Stellar allows users to create tokens that act as tradable, redeemable representations of any asset. Typically, tokens are more useful when tied to currencies (e.g. digitally reflecting dollars, yuan, or euros that allow borderless and instant payments). But with Stellar, you can issue a token for anything, whether that be corn bushels, gold, REIT shares, or an hour of your time as a consultant.

You can exchange any token on the Stellar network with another one, and the Stellar protocol links buyers and sellers. Stellar allows users to send currency like any payment system.

Stellar seeks to decrease transaction costs and time delays as a cross-border transfer and payment system that connects financial firms. Its primary distinguishing characteristic is its consensus protocol. The transaction authentication procedure only allows a small group of trusted nodes in this protocol rather than being available to the whole network of nodes.

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