A few weeks ago, I wrote a post about potential crypto projects that could revolutionize global payments using blockchain technology. One of these projects is Stellar Lumens, a blockchain company founded in 2014 by Jed McCaleb, co-founder of Ripple, and Joyce Kim.
Stellar stands out for its focus on global financial inclusion and building an efficient, accessible payment infrastructure, designed to facilitate fast and affordable transactions, particularly in regions with limited financial systems.
In this post, we will briefly explore what Stellar is, what it proposes, and some of its key partnerships.
What is Stellar?
Stellar is a decentralized payment network aimed at connecting banks, payment systems, and people, facilitating fast and secure cross-border transfers. The primary focus of Stellar is to enable the seamless transfer of assets, both in fiat and digital currencies, in real-time.
Unlike Ripple, which primarily works with large financial institutions, Stellar focuses on universal access to financial services, offering solutions that can be used by large companies as well as individual users, including those in emerging, unbanked markets.
What is XLM?
XLM, also known as Lumen, is the native cryptocurrency of the Stellar network. Its main function is to act as a “bridge” between different currencies, enabling fast and affordable transactions.
Lumens help prevent network “spam” by requiring a small amount of XLM for each transaction, offering an additional layer of security. They are also used to pay transaction fees on the network and facilitate currency conversion within the platform.
How Do Stellar and XLM Work?
Stellar enables the transfer of value through its decentralized consensus protocol. Unlike proof of work (as in Bitcoin) or proof of stake (as in Ethereum 2.0), Stellar uses an algorithm called the “Stellar Consensus Protocol” (SCP), which allows for faster and more efficient transaction confirmations, typically within seconds.
Key Features:
- Fast and Affordable Transactions: Transactions on the Stellar network are almost instantaneous and have very low costs, making it an ideal option for small transfers and remittances.
- Currency Bridges: Stellar allows the conversion of one currency into another through its “bridge” system, facilitating cross-border payments without the need for multiple intermediaries.
- Global Accessibility: Stellar aims to democratize financial access, enabling unbanked individuals to participate in the global economy through its digital infrastructure.
Key Partnerships
Stellar has secured key partnerships that strengthen its goal of becoming a global platform for accessible payments:
- IBM: IBM is one of Stellar’s most important partners, using its network to develop World Wire, a cross-border payment system for financial institutions. This collaboration enhances Stellar’s potential to modernize the financial system.
- MoneyGram: In an innovative partnership, Stellar teamed up with MoneyGram to integrate the remittance network with blockchain, allowing for quick and efficient conversions between fiat currencies and cryptocurrencies.
These partnerships position Stellar as a reliable and viable network for global financial institutions looking to modernize their value transfer processes.
ISO 20022 and Payment Standardization
Like Ripple, Stellar is part of ISO 20022, an international standard that facilitates interoperability between payment systems. This allows Stellar to interact efficiently with other financial institutions, ensuring its transactions are secure and compatible with traditional systems.
This certification is crucial for Stellar’s integration with the global banking infrastructure and increases its adoption by regulated institutions.
Stellar Lumens has built a solid and reliable network that stands out in the crypto world for its focus on global financial inclusion. With key partnerships and a vision centered on accessibility, Stellar is well-positioned to play a significant role in the financial future, helping to bank millions of people and bringing billions of dollars into the financial system that currently operates anonymously with cash.