While I was doing some research on Stellar Lumens (XLM), I came across a great blog post about them.
XLM has caught my eye since they have an impressive backing of investors and partnership with IBM.
Anyway, read more:
After several months of minimal news and low community activity, Stellar Lumens blindsided everyone when IBM released news that it has an ongoing partnership with Stellar and has successfully used the public Stellar blockchain to settle cross border fiat transactions in near real-time. This project involves a network of Pacific and Oceania banks (including Australian and New Zealand banks) and encompasses 12 currency corridors. The new interbank payments network is planned to process up to 60% of all cross-border payments in the South Pacific’s retail foreign exchange corridors by early next year.
This deal is not only amazing for Stellar, it’s a huge validation for blockchain technology as a whole. Examples of public blockchains being picked up for substantial use cases are rare; banks and other large companies are often only in research groups or experimenting with the technology and rarely commit to using a public blockchain for a production system… let alone a production system as large as cross-border payment settlements over 12 currency corridors.
After having stagnant or declining prices since the massive jump in May, this is amazing news for Stellar and especially for Stellar’s investors. It’s definitely caught my attention, I thought Stellar was just another half-surviving altcoin with little substance but this news has made me reevaluate. I spent the past few days doing a deep dive into Stellar, paying close attention to its technology, team, and its business relationships.
What is the Stellar network?
10,000 feet summary
- Like Bitcoin, the Stellar network is a decentralized and distributed ledger.
- Bitcoin is the native currency of the Bitcoin network, while lumens are the native currency of the Stellar network.
- There is no mining equivalent in the Stellar network; you can run a Stellar Core validator node but validating transactions will not reward you with newly minted lumens.
- While Bitcoin uses proof of work as its consensus model, Stellar uses a consensus model called the Stellar Consensus Protocol (SCP). SCP is an implementation of the federated Byzantine agreement (FBA) consensus model.
- SCP does not require much computational power and has a theoretical maximum transaction throughput of 1000 transactions per second.
- Median confirmation time for a Stellar network transaction is 5 seconds.
- Although lumens is the Stellar network’s native asset, the network supports many different kinds of assets and anyone can issue a new asset. Assets backed by external currencies (i.e. fiat or external blockchains) are supported by the Stellar network’s anchor system.
- The Stellar network has a built-in decentralized exchange where assets can be exchanged for different assets based on orders in the decentralized orderbook. Stellar transactions can contain orderbook exchanges.
- Anchors serve as entry and exit points for fiat currencies into the Stellar network. They maintain both fiat currency accounts and Stellar wallets for their users. If the user deposits money into their fiat currency account, the anchor is expected to deposit an equivalent amount of the appropriate Stellar network asset to the user’s Stellar wallet. Vice versa for withdrawals. Most anchors are financial institutions like banks and remittance companies.
- Stellar has a fixed, nominal lumen inflation rate of 1% per year. There also exists a fee pool where the lumen fees for network transactions are sent. Each week, the new lumens created from inflation and the lumens from the fee pool are distributed to Stellar wallets. The amount of lumens each wallet receives is based on a voting system. Every wallet gets to vote for another wallet to receive lumens; each lumen in a wallet counts as one vote. Check out a detailed description of the lumen distribution mechanism here.
- As of October 29th, 2017, there exists 103 billion lumens, with approximately 96 billion lumens held by the Stellar Development Foundation. The annual inflation rate of lumens is 1%.
- Big corporate donors: Stripe, Google, and BlackRock.
- Impressive list of advisors: Patrick Collison, Greg Stein, Sam Altman, and many others.
Post is massive, read more here: