Did you know people and governments have accepted blockchain technology with product improvements? If you arrived here searching for knowledge about the Stellar blockchain, then you are in the right place.
Stellar is a trading platform that enables you to exchange any currency, including cryptocurrencies and USD, thereby making money transactions easy and safe. It functions on the same basis as tokens.
This piece will go over every important component of the Stellar blockchain technology. By the conclusion, you will have a complete understanding of the incredible blockchain and how to use it to your benefit.
What is Stellar Blockchain?
This is a platform that links banks, payment services, and people together. Its main function is to transfer money quickly and effectively at a low cost.
The Stellar Consensus Protocol enables users to transfer money and tokens. This decentralized network links connecting servers (nodes) in the network.
The protocol does not require transaction clearance from all miners in the network. In its place, the Federated Byzantine Agreement (FBA) method is applied, which speeds up the handling of transactions.
The Stellar network's native digital asset is Lumen and it is required in small amounts to open new accounts and conduct transactions.
How Stellar Smart Contracts Ecosystem Functions
The Stellar Development Foundation established the Stellar Consensus Protocol (SCP). It uses a Federated Byzantine Agreement, or FBA, algorithm to reduce reliance on miners for network security purposes.
The FBA algorithm validates transactions using quorum slices, which are discrete pieces of network resources.
SCP enables quick transactions at cheaper costs, with all parties on the network agreeing on a transaction's validity within a few seconds.
Each node that contributes transactions to the global ledger chooses a mini-network of other trustworthy participants. These little networks are known as Quorum Slices.
Just like other blockchain platforms, it adds transactions to shared and distributed public records. Its Lumens coin can be used to offer liquidity and speed up the process.
History of Stellar Blockchain
Jed McCaleb founded the blockchain in 2014, together with the crypto business Ripple and the trading platform Mt. Gox.
Stellar made headlines in October 2017 when it announced a deal with IBM. The cooperation aims to establish various currency gateways between South Pacific states.
In 2016, a prominent IT consulting firm called Deloitte announced a collaboration with Stellar to create a payments app.
Every coin on the Stellar network can be traded for any other token, and the protocol connects buyers and sellers.
Users can easily and rapidly publish bids or requests to the public network, and suitable transactions are automatically settled every few seconds.
Features of The New Stellar Blockchain
In 2019, users on the platform voted to discontinue the yearly 1% subsidy as well as programmable supply increases.
Furthermore, the Stellar Development Foundation elected to limit its share of the XLM supply that year to govern the XLM economy.
Now that we've covered the basics of Stellar blockchain, here are the most important features:
- It can process thousands of transactions every second.
- It supports multiple signatures and smart contracts.
- It has a 1% fixed yearly inflation rate.
- The database is decentralized and open-source.
- The consensus process enables a transaction verification time of 3 to 5 seconds.
How Stellar Financial Global System Works
Stellar allows users to transmit money to each other in the same way that other payment systems do.
Nevertheless, the network also allows users to transfer one currency and receive another. Money may be sent and exchanged in a single transaction.
Let us say Festus has an account with Bank A in the United States and you have an account with Bank B in the United Kingdom. Both of these banks are regarded as "Anchors" on the Stellar network.
Here's what occurs behind the scene
- Festus sends you $5000. The transaction request is submitted to Bank B in seconds to determine whether you are compliant.
- Once Bank A receives approval from Bank B, the money is deducted from Festus' account.
- The USD is subsequently transferred to Bank A's pool account and sent as XLM to the Stellar network.
- After entering the Stellar network, it searches for the best exchange rate to convert XLM to GBP.
- The money subsequently travels to Bank B's base account and is credited to your account.
Lumens (XLM) Token: The Native Crypto of Stellar Network
LUMENS or XLM is the native coin and plays an essential role in supporting all blockchain operations. To ensure a stable supply, approximately 100 billion tokens were issued with an annual inflation rate of 1%.
The cryptocurrency can help pay transaction fees on the Stellar network while also maintaining minimum account balances. It might also guarantee that the network is never flooded.
Lumens potentially act as a bridge between various currencies, allowing for speedier transactions using two separate cryptocurrencies.
Component of Stellar Decentralized System
In the world of crypto, the Stellar network operates peer-to-peer and is not centralized. It is a decentralized system that comes with the following components:
1. Multi-currency financial access
It is one of the most important characteristics. Thus, user A can send USD to user B in Rupees or Naira. Stellar's unique selling point is its smooth decentralized FX. Transactions can occur in various ways and we will take a look at it
2. The ledger system
The architecture employs an open ledger system. The transactions are recorded on the blockchain, which serves as an honest and open ledger system. Every user has access to the ledger, which allows them to see all transactions.
3. Anchors and credits
Anchors are in charge of storing deposits and releasing credits when required in the Stellar system. It facilitates the transfer of value from the old banking system to Stellar, and vice versa.
They also serve as a link between the Stellar network and other payment channels. Stellar Network Anchors are an essential component of the Stellar network and are accountable for the following reasons:
- Storing deposits for users.
- Providing credits to users.
Explore the core use cases of the Stellar blockchain in this YouTube video
Types of Transactions on the Blockchain
The blockchain's distributed exchanges use three separate techniques to facilitate trades, which are listed below.
Indirect Exchange: Stellar check for persons looking to exchange USD for Lumens. They connect you with someone looking for Lumen in exchange for Euros and then ensure that the transaction goes through.
Conversation Chain: It begins by exchanging USD for a different currency, like Yen, which is then changed into more currencies before being converted into Euros.
Direct Exchange: Stellar checks the USD/EUR exchange rate to see whether anyone wants to buy EUR for USD. If someone exists, the transaction takes place immediately.
Apps You Can Build and Make on The Stellar Network
Due to the numerous characteristics the blockchain provides to the community of developers, here are the apps you may build in 2024 and beyond.
- Micro savings accounts for education, health, and insurance
- Microinsurance and Peer-to-Peer lending
- Conditional cash transfers
- Donation mechanisms for nonprofits
- Anchors in several monetary units
- Clients using mobile trading,
- API fusions and commercial plugins.
With the help of Javascript, you can also read this article to learn how to test NFT smart contracts on Blockchains like Stellar
Final Thoughts
Stellar's solutions are already used by several well-known global organizations, demonstrating the company's commitment to spreading blockchain technology.
It connects the banking system regardless of location, making every kind and form of value accessible. This technology enables more access and inclusivity.
FAQs
Who funds Stellar?
The Stellar Development Foundation provides grants and funding to initiatives that build upon and contribute to the evolution of both the Stellar network and Soroban, Stellar's native smart contract platform.
Is the Stellar blockchain secure?
Stellar protects the network's integrity with cryptographic mechanisms that use public keys. Stellar transactions are carried out via node consensus.
What is XLM Cryptocurrency?
XLM, or Stellar Lumens, is the stellar blockchain's native coin that is used to pay transaction fees. However, it is not the sole cryptocurrency on the Stellar blockchain, which can be used to transfer tokens representing everything from commodities to fiat currencies.
How Can I Check the Blockchain for Stellar Transactions?
A stellar-focused block explorer allows you to view a stellar transaction. These are online tools that show users recent transactions, blocks, and account balances.
