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.
The Stellar price page is part of the Crypto.com Price Index that features price history, price ticker, market cap, and live charts for the top cryptocurrencies
As an enthusiast deeply immersed in the world of blockchain and cryptocurrency, let me assure you that my knowledge spans a broad spectrum of decentralized technologies, including Stellar. My expertise is not only theoretical but is backed by hands-on experience and a keen understanding of the intricacies of blockchain protocols, consensus mechanisms, and the practical applications of various cryptocurrencies.
Now, let's delve into the key concepts mentioned in the article about Stellar.
Stellar Overview: Stellar is a blockchain-based platform designed to facilitate the creation, sending, and trading of digital representations of various forms of money. It distinguishes itself by prioritizing the growth of economies through remittances and bank loans for individuals without access to traditional banking services.
Consensus Protocol: Stellar's primary differentiator is its consensus protocol, the Stellar Consensus Protocol (SCP). Unlike Bitcoin, which relies on the entire miner network to approve transactions, SCP utilizes the Federated Byzantine Agreement (FBA) algorithm. This allows for faster transaction processing by employing quorum slices, enabling a designated subset of nodes to approve and validate transactions.
Stellar Cryptocurrency - Lumens (XLM): The native cryptocurrency of the Stellar network is called Stellar Lumen (XLM). Lumens power the Stellar payment network, serving as a means of facilitating transactions and maintaining the overall functionality of the network.
History of Stellar: Established in 2014 by Jed McCaleb and Joyce Kim, Stellar gained prominence through the collaboration with Patrick Collison, CEO of Stripe, resulting in the formation of the Stellar Development Foundation (SDF). The initial coin offering (ICO) raised $39 million, and the project deployed 100 billion lumens. Stellar experienced a significant event in November 2019 when over 50 billion XLM underwent a token burn, leading to a surge in price.
Stellar's Operation: Stellar operates on a decentralized network of servers with a distributed ledger that updates across all nodes every 2 to 5 seconds. The network's efficiency is attributed to SCP, allowing for up to 1,000 network operations per second. This rapid processing is achieved by the selection of a subset of "trustworthy" nodes for transaction approval.
Use Cases of Stellar: Stellar aims to connect financial institutions globally, enabling the creation and exchange of digital representations for various currencies. It allows users to create tokens representing any asset, not limited to traditional currencies but extending to commodities, shares, or even services. The Stellar protocol facilitates the exchange of these tokens, reducing transaction costs and time delays, particularly in cross-border transfers.
In conclusion, Stellar's innovative approach to consensus, its focus on financial inclusivity, and its versatility in token creation and exchange make it a compelling player in the blockchain space, as outlined in the provided article.
