If you’ve ever tried to send money through the international bank, you’ve probably noticed how slow it can be. You have certainly wondered why not create a global banking system open to all to facilitate cross-border financial transactions. Like you, other people have asked themselves the same questions and the Stellar network project is one of the answers to this problem. How does the Stellar platform work? Does it really meet this need? Here we give you our opinion on this platform and its cryptocurrency the Lumens (XLM).
Find out more about Stellar
The Stellar platform has characteristics similar to those of Ripple, while being distinguished by some differences.
What is special about Stellar?
Founded in 2014 by Joyce Kim and Jed McCaleb, co-founder of Ripple, the Stellar network, managed by the Stellar Development Foundation, is a solution for making cross-border payments. It’s about a open source platform everyone can collaborate on.
Unlike Ripple, more oriented towards banks and financial institutions, Stellar is more for individuals. The platform has its own cryptocurrency, Stellar Lumens (XLM), whose course you can follow in real time. This cryptocurrency can be purchased with both cryptocurrencies and Fiat currencies, such as the euro or the dollar.
What is the purpose of the creators of Stellar?
Stellar is a centralized platform which aims to serve as bridge between financial institutions, individuals and banks with a view tospeed up the processing of personal transactions. It therefore proposes to considerably reduce the time and cost of international financial transactions.
It also allows automatic conversion of the currency sent so that the recipient receives the desired currency. For example, you can send Bitcoin that your recipient will receive in euros. The aim of the founders of the network is therefore to create an open global financial network, in which transactions remain fluid and flexible.
How to invest with the Stellar network?
The Stellar network allows you to transact in any currency of your choice. For that, you must have a minimum of 20 XLM, amount which attests to your activity on the platform. The XLM, which constitutes the cryptocurrency generated by the platform, is used for settlement of costs related to financial transactions.
To know : Stellar Lumens is a cryptocurrency that does not require no mining (mechanism for validating transactions in the blockchain). In fact, all the XLM tokens were pre-emitted and distributed when the platform was launched.
The validation of transactions is carried out by a decentralized network servers following the Stellar Consensus Protocol (SCP). Of “Anchors” (anchors) are positioned as guarantees for deposits and withdrawals. It simply acts as a gateway between the original currency and the Stellar platform.
To put it simply, by admitting that you want to send euros to a friend, you entrust to this anchor point your funds (cryptocurrencies, euros, or even dollars) that it will convert to Lumens on Stellar’s network. Finally, by removing the cryptocurrency from the network, the anchor will again convert to change the Lumens to euros in order to send them to your friend.
Each anchor has a copy of order register (public ledger) of Stellar transactions, regularly updated. Once the amount of the transaction is in the recipient’s account, they can access it through an anchor, which guarantees the original currency. The latter then updates the register automatically.
To note : To store and protect your Stellar Lumens, we recommend that you use a cryptocurrency wallet.
What advantages does Stellar offer?
The Stellar network has many advantages:
- The fluidity of border transactions, which take place in real time between 2 to 5 seconds;
- The versatility (real-time payments, funds transfers, micropayments);
- Of very low transaction costs ;
- Many partnerships with large companies (including IBM) which reassure investors;
- Theopening from the platform to individuals, banks and other institutions;
- The automatic conversion currencies to match the needs of transaction recipients.
Did you know ? The Stellar network can support up to 1000 transactions per second.
What disadvantages for the Stellar platform?
The platform nevertheless has some weak points:
- Stellar Lumens stays pretty unrecognized unlike other cryptocurrencies;
- The platform does not use no mining technology and its XML tokens were all mined and distributed at launch.
Our opinion on Stellar
Stellar is proving to be the very solution found by its creators to correct Ripple’s orientation. While the latter was considered to be the “bank cryptocurrency”, Stellar now constitutes the version for individuals. Indeed, the network allows everyone to do financial transactions all over the world in record speed and at reduced costs.
Although flagship cryptocurrencies (Bitcoin, Ethereum, etc.) overshadow the Stellar Lumens, which is still relatively unknown, XML remains one of the most promising cryptocurrencies with very good forecast.