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What is Stellar

What is Stellar?

After 11 years, Bitcoin is still the main topic of the cryptocurrency world, but it is good to know that there were other cryptographic algorithms that caused a significant increase in profit and capital among developers. Stellar blockchain algorithm is one of them.
Stellar digital currency is another type of currency code that you must know. Although the number of digital currencies has increased in recent years and there are now a considerable number of them on the market, it is not wise to invest in all of them. Meanwhile, some currency codes with better features and more security have been able to distinguish themselves from others. Stellar digital currency is also one of these categories that we intend to introduce in this article from Lumenswap.

What is Stellar Blockchain?

What is Stellar Blockchain?
Stellar is an open-source, decentralized protocol for digital currency to fiat money low-cost transfers which allows cross-border transactions between any pair of currencies.
Stellar, like other digital currencies, uses blockchain technology. In this decentralized network, there are no central institutions and decision-makers. All transaction details in Stellar are stored on its blockchain as a general ledger, and anyone can view the general ledger and transaction details. In the Stellar network, information is distributed between ubiquitous nodes (servers) instead of being collected in a centralized source (such as a bank).

What is the Stellar Consensus Protocol?

One of the challenges of distributed systems is to create consensus among transaction approvers before a transaction is registered, which is known as the issue of Byzantine generals. Some decentralized networks have used an algorithm called Practical Byzantine Error Tolerance (PBFT) to solve this problem. In this method, 66% of verifiers must approve each transaction, and the number of malicious verifiers must always be less than 33%. Hyperledger and ripple systems currently use this algorithm.
The researchers found that the practical Byzantine fault tolerance algorithm did not have the same fault tolerance. The problem is that the network acts as a centralized system before the identifiers can be identified. For this reason, the Stellar network proposed a new way to solve this problem and suggested that this algorithm be replaced by another algorithm called the Federated Byzantine Agreement. In this algorithm, the verifiers do not need to be pre-specified. Any validator can trust those who wish, and thus this part of the previous algorithm (PBFT) is also decentralized.
With the Federal Byzantine Verification algorithm, instead of checking the votes of all verifiers on the network to verify the transaction, each verifier only checks the votes of their trusted verifiers and records that transaction if the majority of his or her trustees have approved a transaction. But Hyperledger, Ripple, Bitcoin, and other blockchain networks that use the Byzantine authentication system require the approval of the majority of all approvers.
In the new algorithm, each verifier, or node, must individually determine how many other nodes it trusts. When one node trusts the other node, they form trustworthy pieces called quorums. The ideal state of this network occurs when these pieces overlap each other.
What is the Stellar Consensus Protocol?
This overlap leads to consensus across the network. But if there is no overlap between these quorums, the network will disintegrate and lead to conflicting transactions, which is the biggest risk of using the Stellar network. In contrast, the most important advantage of using this network is its very high speed, and the reason is that there is no need to count the votes of all nodes.

What is the difference between Stellar and Ripple?

Stellar is an open-source payment technology that bears many similarities to Ripple, as its founder, Jed McCaleb, also founded Ripple. Just like Ripple, Stellar is a payment technology that aims to connect financial institutions and drastically reduce the cost and time required for overseas transfers. In fact, both payment networks initially used the same protocol. However, this is where the similarities end.
What is the difference between Stellar and Ripple?
The fork in the Stellar Protocol ended in early 2014 with the creation of the Stellar Consensus Protocol (SCP). Also, both systems are fundamentally different. While Ripple is a closed system, Stellar is open source. They also have different customers. Ripple works with established banking institutions and consortia to simplify its overseas transfer technology. In contrast, Stellar is developing markets and has multiple uses for its technology, including remittances and the distribution of bank loans to non-bank banks.
Ripple was formed with the aim of establishing financial exchanges between banks and financial institutions. By separating the currency from Ripple, the CEO of Stellar has stated that its main goal is to provide high-speed, affordable financial services to users, thereby seeking to create a secure and fast environment for micro-financial exchanges around the world. Stellar Decentralized Blockchain has the ability to perform thousands of transactions in 3 to 5 seconds. This advantage, which was also the main purpose of making Stellar cryptocurrency, is also the main reason for its popularity.

What institutions use Stellar blockchain?

What institutions use Stellar blockchain?
Stellar entered the market in October 2017 after announcing its partnership with IBM. This partnership created a monetary network among the countries of the South Pacific. The project aims to make at least 60 percent of cross-border payments between countries in the region. These countries include Australia, Fiji, and Tonga. This provides connections between small, unprofitable businesses and banking institutions to expedite business transactions. For example, a farmer in one area can contact a buyer in another area and make the transaction of his choice to transfer money.
In 2016, Deloitte, a well-known technology consulting firm, announced a partnership with Stellar to develop a payment program. At the 2017 McCaleb conference, he announced that 30 bucks had used Stellar to use their overseas transfers.

What is the reason for Stellar's popularity?

What is the reason for Stellar's popularity?
Stellar offers the wide range of services you would expect to receive from a regular bank, but with a few fundamental differences. These transactions take place in a decentralized network, at a much lower cost and higher processing speed than a traditional bank.
These payments are processed in 3 to 5 seconds, currency exchange in this system is relatively simple and network costs are low. All of these services are offered with a different approach than many other cryptography projects.
What is the reason for Stellar's popularity?

Summary of Stellar blockchain features:

  • Has an open and decentralized database.
  • Transaction confirmation time is between 3 to 5 seconds
  • Able to manage thousands of transactions per second
  • Uses the Stellar Consensus protocol
  • Stellar token is called "Lumen" and is abbreviated as "XLM"

Where does Stellar value come from?

Exchanging between digital currencies or fiat currencies is a time-consuming and costly process that is done faster and cheaper through Stellar. The more Lumen digital currency is accepted, the more its value will increase.
Quantity affects scarcity, which is why the price of a Lumen is much lower than the price of a bitcoin. It is difficult to determine the value of Lumen in the future, as it is strongly related to the widespread acceptance and success of this technology.

Is Stellar a Good Investment?

Is Stellar a Good Investment?
The Stellar network has its own digital currency called Lumen(XLM). Unlike other tokens in other digital currency networks, this token was not created as an extraction but at the beginning of the network. One hundred billion lumens were built in 2015.
By examining different forecasts, we can expect more use and growth of this currency in the future. But since the goals of this project are clearly defined, it is up to you to determine whether investing in these cryptocurrencies is good or not.

Fees and financial incentives in Stellar blockchain

The default fee on Stellar is 0.00001 XLM (100 Stroops), which is a small amount and is only built to prevent network attacks. It is possible to increase this amount during network congestion, but the important point about it is that this fee does not belong to the miner or the same confirmer and is deposited in a special account. There is also no similar Bitcoin for each bonus block.

Why should anyone be a so-called miner in Stellar?

The important point to note is that a similar process to mining does not occur in Stellar, and there is no miner in the network at all, but it is the confirmation nodes that hold the blockchain and reach a consensus. For this reason, setting up a node costs very little (as much as setting up a mail server) because the proof is not done and not much load is placed on the hardware.
Most people who start a node are providing services on the Stellar platform and need direct access to its blockchain data, similar to people who start a full node on the Bitcoin network.

Mechanism of lumen inflation and commission distribution

Mechanism of lumen inflation and commission distribution
Prior to version 12, there was an inflation mechanism for distributing lumens in Stellar, which distributed the collected fees along with a number of primary lumens among network members at various intervals. This mechanism increased the number of currencies in circulation by 1% each year. But since September 2019, this mechanism has been abandoned at the suggestion of the Developers Foundation and with the approval of the participants. After this change, the fees are locked at an address and no one has access to them.

Protocol 17

On June 1 of this year, the Stellar endorsers (XLM) decided on important issues. According to an official announcement from the Stellar Development Foundation, a non-profit foundation for the development of the Stellar blockchain, Stellar Network endorsers on this date have voted on the fate of updating the network's Protocol 17. The 17 Stellar protocols released and will include a new feature that will open new horizons for the issuance of regulated assets in the Stellar network.
Stellar Protocol 17
After this update, the asset recovery mechanism will be activated immediately on the Stellar network, which will improve the network's ability to comply with the rules and regulations of financial markets around the world. New features will allow asset issuers or their agents to cancel the asset under certain circumstances.
To enable this feature, various parameters have been added to the Stellar protocol, including a new account flag, new credit lines, a claim balance, and a new mechanism for taking advantage of these flags. After this update, asset issuers will be able to mark their assets and return the assets that the fraudsters extorted. They can also respond to requests from a judicial or market regulator and verify individuals so that they can recover their assets if a private key is lost.

Conclusion

Stellar blockchain is one of the oldest and best cryptocurrencies on the market, which has a very long history and its cycles are somewhat predictable. The main purpose of this platform is to connect people, payment systems, and banks around the world.
Stellar is an open-source, decentralized protocol for digital currency to fiat money low-cost transfers which allows cross-border transactions between any pair of currencies.