Stellar is an open-source decentralized platform that aims to connect banks, payment systems and individuals, and is designed to facilitate and accelerate secure and cost-effective cross-border transactions.
Stellar was founded by Jed McCaleb, who co-founded another popular cryptocurrency called Ripple, in collaboration with former attorney Joyce Kim. Stellar was originally launched on July 31, 2014 and was permanently supported by the non-profit Stellar Development Fund.
Founded in partnership with Stripe CEO Patrick Collison, the company received approximately 2%, or $2 billion, of its initial excellent investment.
Stellar experienced impressive growth from the start, attracting nearly 3 million unique users by January 2015, and by April 2015 Stellar Development Corporation modernized the network by encrypting a new consensus algorithm that was introduced in November of the same year. This new algorithm used the cryptocurrency protocol SCP (Stellar Consensus Protocol) created by David Mazeris, a professor at Stanford University.
The Stellar network is based on blockchain technology as it basically runs a network of decentralized servers with a distributed ledger.
Ledgers update every transaction and provide every completed ledger on every server. These decentralized servers communicate with each other and update the ledger every 2-5 seconds. This communication process is called consensus.
To send payments on the Stellar network, you must send payments on the Stellar network, you must have an Anchors balance. Anchors essentially act as a link between a given coin and the Stellar network, and the client has to exchange funds for the funds with the anchor on the network. In return for your deposit, a credit will be issued to your virtual wallet, which can be sent or received on the network between participants.
One of Stellar’s most notable features is that it supports distributed exchange mode, which gives the user the ability to send a payment in a specific currency, such as US Dollars, despite having a balance in Euro currency. Stellar Network ensures that foreign currency conversion (Forex) is performed automatically at the best rates offered. In addition, the recipient of the funds can withdraw them through the founding partner, such as a bank
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The Stellar network owns a local cryptocurrency called Lumens, as it uses Lumens as its passport currency (cryptocurrency) on its network. As a native local currency on the Stellar network, Lumen serves two important functions: facilitating seamless multi-currency transactions and reducing DoS attacks by charging a pro forma transaction fee of 0.00001 Lumens per transaction. DoS attacks are typically malicious attempts by unethical participants to flood the network.
XLM has caught the attention of investors thanks to the real-world use cases of the Stellar network: in August 2014, Mercado announced as the first Brazilian exchange to use the Stellar network, and in 2016, the services company Deloitte announced its collaboration with Stellar to build a Deloitte Digital Bank app for cross-border payments.
It is worth noting that Stellar has a long-term partnership with tech giant IBM. IBM is keen to deploy XLM in real-world blockchain solutions, while the company has announced that it has no plans to launch a private cryptocurrency, cementing XLM’s position as IBM’s preferred cryptocurrency for cross-border payment solutions. In January 2018, the Mobius network made its first coin offering on the Stellar network.