KEYTAKEAWAYS
- Decentralized and Fast Payments:
Stellar (XLM) facilitates seamless global transactions with a decentralized network and quick confirmations, making payments efficient and cost-effective. - Targeted for Individuals Worldwide:
Unlike Ripple, which focuses on institutions, Stellar serves individuals globally, promoting financial inclusion through partnerships and innovative features. - Promising Future with Smart Contracts:
Stellar's growing ecosystem and smart contract support attract developers, paving the way for expanded use cases and broader adoption.
CONTENT
Stellar (XLM), a decentralized payment network empowering global transactions with fast, low-cost solutions. Learn its unique features, Ripple comparisons, and future innovations.
WHAT IS STELLAR (XLM)?
Stellar Lumens (XLM) is a cryptocurrency built on the Stellar blockchain, a decentralized, open-source payment network designed for transferring and storing money.
Lumens (XLM) is the native currency of the Stellar network, primarily used to facilitate currency conversions and pay transaction fees.
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Origin and Background of Stellar
Stellar was launched in July 2014 by a nonprofit organization, co-founded by Jed McCaleb and Joyce Kim. Jed McCaleb, after leaving Ripple due to differences over the company’s direction, collaborated with Kim to create Stellar.
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Stellar’s Purpose and Vision
While Stellar shares similarities with Ripple in providing fast, low-cost cross-border payment solutions, their target audiences differ.
Ripple focuses on financial institutions and banks, offering services like bank remittance and cross-border payments.
In contrast, Stellar caters to individuals globally and collaborates with numerous payment platforms.
The Stellar network aims to enable users to hold both fiat currencies and various forms of digital assets, facilitating seamless currency transfers without the need for intermediaries or third-party payment systems.
Its decentralized infrastructure eliminates geographical and currency-related restrictions, making international remittances more accessible and less burdensome.
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Social Impact and Partnerships
Stellar‘s mission is to provide low-cost financial services that empower individuals and unlock their economic potential, particularly in underbanked or developing regions.
The network collaborates with many payment platforms and financial institutions from developing countries and emerging markets, including prominent names like IBM, ICICI Bank, Stripe, and Coins.ph.
By building an inclusive payment ecosystem, Stellar strives to deliver seamless financial services to users worldwide, contributing to economic growth and advancing financial inclusion.
>>> More to read: How to Get Crypto Passive Income Easily?
HOW DOES STELLAR (XLM) WORK?
Similar to other blockchain platforms, transactions on the Stellar network are recorded on a shared, decentralized public ledger.
Stellar uses a consensus algorithm based on the Federated Byzantine Agreement (FBA), known as the Stellar Consensus Protocol (SCP).
This protocol enables fast and cost-effective transactions, with participants on the network reaching an agreement on transaction validity within seconds.
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How the Stellar Consensus Protocol (SCP) Works
SCP relies on quorum slices, which are small trust networks formed by each ledger participant (called nodes) selecting other trusted participants.
These quorum slices overlap across the network, allowing a global consensus to be reached efficiently.
Once sufficient nodes agree on the validity of a transaction, it is quickly added to the ledger.
This design ensures Stellar’s ability to process transactions at high speed while maintaining reliability and security.
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4 Key Features of the Stellar Consensus Protocol
1. Decentralized Mechanism
The Stellar network operates without reliance on a central authority. Nodes independently choose their trusted participants, creating a decentralized infrastructure.
2. Low Latency
SCP allows transactions to reach consensus within seconds, significantly reducing transaction confirmation times.
3. Flexible Trust
Users have the flexibility to select trusted nodes without relying on predefined trust relationships, enhancing network adaptability.
4. Asymptotic Security
Even if some nodes fail or act maliciously, the network remains secure and operational as long as overlapping quorum slices persist.
The Stellar Consensus Protocol enables Stellar to handle transactions rapidly, efficiently, and at a low cost while maintaining decentralization and security.
This makes Stellar a powerful technology for global payment systems.
>>> More to read: What is a Node in Crypto?
STELLAR (XLM) VS RIPPLE (XRP)
Stellar (XLM) and Ripple (XRP) share technical and developmental similarities, largely due to their co-creator, Jed McCaleb, who played a significant role in developing both networks.
Unlike many general-purpose blockchain platforms, Stellar and Ripple were designed with specific user groups in mind, making them unique in the world of cryptocurrency payment protocols.
✎ Technical Similarities and Differences
Both Stellar and Ripple do not rely on mining for their operations, in contrast to Bitcoin and other mined cryptocurrencies.
Mining-based networks often suffer from slow transaction speeds and high costs, while Stellar and Ripple eliminate these issues by employing alternative consensus mechanisms.
- Stellar: Uses the Stellar Consensus Protocol (SCP), a mining-free system where “trusted” nodes validate transactions. This system accelerates transaction times as nodes communicate directly with trusted subsets instead of the entire network. Stellar can process thousands of payments per second, with transactions confirmed in just a few seconds.
- Ripple: Operates on a similar principle but uses the Ripple Protocol Consensus Algorithm (RPCA) to validate transactions efficiently.
✎ Target Audience and Use Cases
- Ripple (XRP): Primarily serves banks and financial institutions, offering services such as interbank remittance and cross-border payments. Its focus is on providing efficient solutions for corporate entities.
- Stellar (XLM): Targets individuals, enabling global financial inclusivity. Stellar collaborates with numerous payment platforms, especially in developing countries where financial services are less accessible. Its global partnerships include organizations aiming to improve financial accessibility in underbanked regions.
✎ Transaction Speed and Cost
Both Stellar and Ripple excel in transaction speed and cost efficiency compared to traditional payment systems and mining-based cryptocurrencies.
However, Stellar’s SCP allows for slightly faster and cheaper transactions, making it a preferred choice for personal use cases.
✎ Key Distinction
The core difference lies in their intended user base:
- Ripple focuses on corporate financial services for institutions like banks.
- Stellar emphasizes individual and global financial inclusion, especially in areas with limited banking infrastructure.
While both Stellar and Ripple were designed for fast, low-cost transactions, their target audiences set them apart.
Ripple is tailored for institutions, whereas Stellar aims to empower individuals and foster financial inclusivity worldwide.
Their distinct approaches ensure both networks maintain relevance and value in the evolving crypto payment ecosystem.
>>> More to read: XRP: The Digital Asset for Global Payments
STELLAR (XLM) FUTURE OUTLOOK
Stellar (XLM) has positioned itself as a global payment system focused on fiat and cryptocurrency transactions, including payments and remittances.
It has established partnerships with prominent organizations such as Stripe, IBM, and Deloitte, offering tailored payment solutions that drive adoption of Stellar in traditional financial systems.
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Expanding Ecosystem and Key Developments
As of now, Stellar’s network supports 298 projects and partnerships spanning 18 sectors, including exchanges, payments, NFTs, and wallets.
Notably, the Stellar network now supports smart contracts, attracting more developers to build on its platform and expanding its ecosystem.
Jed McCaleb, the founder of the Stellar Development Foundation, recently emphasized the distinctions between Stellar and Ripple, highlighting Stellar’s unique codebase, consensus mechanism, and features such as smart contract support.
These differentiating factors set Stellar apart in the blockchain space. (See more…)
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Strategic Collaborations
Stellar has also announced a new partnership with Mastercard, integrating Mastercard’s crypto identity system into the Stellar network.
This collaboration aims to enable approved and compliant interactions between Stellar and other public blockchain networks. (See more…)
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Bright Future Ahead
These developments demonstrate Stellar’s active efforts to expand its applications in both traditional finance and the blockchain space.
With a growing ecosystem and strategic partnerships, Stellar’s future appears promising as it continues to foster global financial inclusion and innovation.
