One of the co-founders of Ripple named Jed McCaleb didn’t like the direction their currency was going in, so he decided to part ways with it and came up with a new cryptocurrency called Stellar. Stellar and Ripple work quite similarly, but there are some key differences between them. Firstly, Stellar is designed to be an open source protocol, whereas Ripple is based on a closed system. Furthermore, Stellar is designed to cater for people (aka general audience), while the idea behind Ripple is to facilitate banks and other financial institutions. What these differences mean is that despite working in a similar fashion, they both have a completely different customer base.
Breaking Down Stellar
Stellar runs on decentralized servers with its very own dedicated ledger, which is updated every 2-5 seconds. Stellar makes use of Stellar Consensus Protocol (SCP) to form consensus among the nodes. These nodes are known as Stellar cores on the Stellar network. Stellar does not use the proof of work or the proof of stake to validate transactions. Instead, it uses Federated Byzantine Agreement (FBA) algorithm that only requires a fraction of network to validate a transaction. This means that you won’t need some supercomputer to get the job done as it can be done easily by an average machine. Due to adapting this system, Stellar is able to process over 1000 transactions per second.
Why is Stellar Popular?
Stellar’s Lumen (XLM) currency doesn’t have an attractive value, so you may wonder why is it so popular? The answer to that question is its ability to cater people cross-borders. The traditional ways of sending and receiving money across borders are quite hectic and cost a lot too. However, with Stellar, this whole process has been made quite simple. Instead of relying on banks, Stellar has partnered up with different organizations across the globe and they have named these partners “Anchors.” With Anchors, the transfer of money across the border is fast and easy.
To understand it further, let’s use an example. Assume that you live in Canada and you want to send $100 to your friend who lives in India. In order to make it happen, you have to contact your nearest Anchor (the partner org of Stellar) and tell them that you are looking to send money to your friend in India. The anchor will look up the database, find and contact the anchor in India, and will tell them to give $100 to your friend. The money will be transacted in an instant. This is an extremely convenient way of doing cross-border transactions, which is why you see Stellar becoming so popular around the globe.
At the time of writing, Stellar trails behind other leading cryptocurrencies on the coin market cap and is ranked at the 7th position with its price set at $0.204578.
Stellar has been quite successful especially in terms of its network. It is being used for Initial Coin Offerings (ICOs), to transfer money across borders, and much more. However, Jed McCaleb doesn’t want to stop here as he has announced plans to focus on South Pacific region as he wants Stellar’s network to be responsible for more than 60% of cross-border transactions. He wants countries like Australia, South Korea, Fiji, and Sri Lanka to connect to each other without having to face any barrier.
McCaleb plans on achieving this goal by having more anchors in place in different locations. With their help, anyone in Australia will be able to deal with an individual from South Korea without any hassle, hence making the whole process easier. This is their goal for the future and they are motivated to achieve it. To improve their odds of success even further, more than 30 banks have approved Stellar, and McCaleb confirms that more financial institutions will be added with time. So, things are looking up for Stellar, and with clear direction and objective, they certainly seem like they have a bright future ahead of them.