Information about Stellar

9 Things You Should Know About Stellar

Team Bitvavo
Team Bitvavo Stellar

Since you are interested in crypto, you probably know that ICO fever has resulted in dozens of cryptocurrencies entering the market. It became borderline impossible to stay tuned and be up-to-date with all the developments in this landscape.

Look at this article as a part of our latest efforts to shed some light onto numerous cryptocurrencies and their distribution networks. Today we are here to talk about Stellar, a distribution platform created to help people move cash in a quick and yet reliable way. Here are 9 things you should know about Stellar.

Stellar is not Lumens

Stellar is not Lumens
In the crypto world, it’s easy to get confused. This is why you can quite often hear people referring to Lumens as Stellar and vice versa. Right at the start, we would like to leave no space for any confusion. It is quite simple – Lumens (XLM) is the name of the token, the cryptocurrency. Stellar is the name of the platform.

What is Stellar?

We have already established the starting point for Stellar being a platform. But let’s be more specific. Stellar was built to connect people, payment systems, and banks. Thanks to Stellar, people can transfer cash worldwide in an efficient and affordable way.

The Stellar platform is an open source, distributed, and community-owned network. The organization that provides most of the technical and operational support for Stellar is Stellar.org. Since it is decentralized and open source, Stellar.org has enabled the Stellar network to get some traction and draw the attention of the crypto-public.

On the other hand, Stellar.org operates like any other company, thus being in a position to form partnerships with banks and other numerous financial institutions to strengthen Stellar’s position and increase the number of use cases.

When was Stellar born?

Back in 2014 Jed McCaleb, the co-founder of Ripple, didn’t agree on the key principles that Ripple should be built upon for the future with the rest of the Ripple board members. You may know him as the creator of eDonkey. Jed wanted to expand Ripple and enable people to use it to enjoy more seamless financial transactions. The board didn’t agree, thus Stellar was born.

Stellar Lumens wallet
Shortly after the unfortunate disagreement, Jed McCaleb partnered with an experienced investor, Kim Joyce, and started working on a brand new project. Thus, the Stellar open source protocol came into being.

They leveraged the power of the blockchain technology to create a network that turns the cross-border monetary transactions, including digital and fiat currencies, into everyone’s reality. Today people use Stellar to receive and/or send money anywhere in the world. Even if they don’t have a bank account.

Stellar Doesn't Use the Same Code as Ripple

Back in 2014, Stellar was a fork of Ripple. Quite logically, it was based on the code developed by programmers working in the Ripple Labs. Today, Stellar works on a completely new code. Developers that have studied Stellar meticulously confirm that Ripple and Stellar have almost no shared code.

Buy Stellar Lumens
Validation protocols of Stellar and Ripple are also quite different. As you might already know, Ripple relies on probabilistic voting. Each transaction has to be validated by a large number of nodes (80%), before it can enter the ledger.

Stellar operates quite differently. A professor of computer science, David Mazieres, was the one who developed the Stellar Consensus Protocol. The SCP is designed to be safe but it also adds more flexibility to the network, allowing nodes to quickly become validators.

The Stellar Ledger is Open

This fact doesn’t strike us as a surprise. The Stellar ledger is open for anyone who wishes to see it. It can be easily accessed and people can seamlessly join it. The ledger stores all the transaction details, and those details remain public for anyone, as long as they are on the network.

What are Anchors?

Since there is a great chance to stumble upon the term Anchor when one reads about the Stellar, let us elaborate. Some of the networks built on

Stellar Lumens anchor
blockchain technology can implement entities able to issue credits or hold a deposit. These entities on the Stellar platform are called anchors.

Stellar implemented them to allow transactions to be made between parties using different currencies. In fact, every transaction that takes place on this platform works on the same principle – as a credit issued by anchors.

What are Offers and Orderbook?

The “offers” and “orderbook” make Stellar a very fast and efficient platform. These concepts stand at the root of the Stellar distributed exchanges and enable people to sell and buy different currencies. Simply put, offers are “public commitments to exchange one type of credit for another at a predetermined rate”.

The orderbook contains all the offers in the Stellar ledger, in the form of a currency/issuer pair.

Stellar Enables Both Direct and Indirect Exchanges

Stellar supports multi-currency transactions. The currency exchanges can either be direct or indirect. The direct one takes place if there is someone who wants to buy the offered currency. For instance, if someone wants to sell EUR for the USD, the platform looks for someone who wants to buy EUR for USD. If there is such a pair, a direct exchange is automatically triggered.

Stellar Exchanges
An indirect exchange is offered if there isn’t an appropriate buyer on the other side. The issuer can choose to exchange their currency for Lumens. For this to happen, there should be a person in the ledger currently looking to sell Lumens for EUR.

If neither of the above methods is available, Stellar goes through a chain of conversions to find the most optimal currency/issuer pair.

Stellar Features

Let's sum up with a list of Stellar’s features:

  • The Stellar ledger is decentralized and open
  • The confirmation time takes up to 5 seconds
  • The Stellar platform supports thousands of transactions per second
  • The validation is handled by the Stellar Consensus Protocol
  • The Stellar token is Lumen (XLM)
  • There are 100 billion Lumen in the network, at a fixed annual inflation of 1%

Hopefully, this has helped you understand the principles of the Stellar platform and its relation to Ripple a little bit better. The partnerships of Stellar with IBM, Deloitte, and Stripe, put this platform in the eye of the cryptostorm. We are looking forward to seeing what the future has in store for Stellar. If we end up finding something new about Stellar, don’t worry, we will share it on our blog section.