Guest Post – Anujith
Early in January 2018, Stellar Lumen cryptocurrency broke into the ranks of 10 largest digital currencies, when its market capitalization rose by 65% and touched US $ 10 billion. Stellar is the organization that oversees all developments regarding Lumen, which is the cryptocurrency. The key value propositions are allowing users to quickly exchange government-backed currencies, and facilitate cross-asset transfer of value including payment.
Stellar lumen works on blockchain technology, like most other cryptocurrencies. Blockchain is a technology where a network of computers maintain a shared, verifiable, and permanent record of data. It is a distributed database comprised of two or more block records (referred to as “blocks”), which are linked together while adhering to a predetermined standard or protocol. Each node in a blockchain can be considered as a ledger, hence blockchain is also referred to as “Distributed Ledger Technology” (DLT). There is no centralized authority, rather, every node in the blockchain is a point of authority, and every node has the same version of information. By providing proof of work (POW), which is essentially evidence that a very significant amount of number-crunching work has taken place, and by getting consensus from the majority of the nodes in the network, a node can add a new block. This rigorous process reduces economic viability of hacking blockchain, hence, every information in blockchain is mathematically proven.
How does Stellar Lumen work?
It works as following:
- Integration to Stellar network means configuring the users systems to communicate to the stellar network. First identify the use cases appropriate for you, then your technical team needs to write appropriate code to communicate to the network and test it. There is guidance available from the stellar team in the form of software, tools and documentation. The network is free to use, there are no commercial restrictions, and the integration is likely to take 120-200 hours depending on the maturity of the technical team of the user. After successful integration, your system joins the decentralized network of Stellar as a node, and has a complete copy of the global stellar
- The stellar servers communicate with each other to ensure only valid transactions are applied successfully to the global ledger.
- You as user upload your funds to an anchor on the system. Anchors are entities that are trusted in the network, and serve as bridge for a given currency and the stellar network. Anchors are exactly like what PayPal is in today’s system, which holds your money and issues credit to your wallet, and you use that to make payment.
- When you submit a transaction to transfer money to someone else on the network, a set of trusted servers will begin a process to verify whether you really have the required amount of credit. Once majority of the servers agree that you indeed have the required credit, your transaction will be marked as a valid one.
- You can buy Lumens in Bittrex, Polonex, and Binance
- You can use Stronghold to store Lumens, it is a distributed exchange built into Stellar’s system. Alternatively you can use Ledger Nano S, Stargazer or Papaya
Use cases:
Below are a few key use cases, the list is not exhaustive:
- If you want to transfer money to a recipient in a different country, you can use our credited balance to transfer funds. Stellar will automatically convert the fund in your currency into the lowest exchange rate, and deposit the fund in local currency, into the recipients account.
- You can place exchange orders for currency exchange, and specify rates you have pre-determined. The order will first enter the order book of Stellar, and then the global marketplace, where you can view how it is stacked up against other orders.
- You can place an order for a multi-currency transaction. Stellar will do one of the following three things:
- Search if there is a previous offer on its order book requiring this currency, and if it finds, it will automatically facilitate the exchange.
- Stellar will convert the funds into Lumens, and then converts Lumens into the currency of the recipient user.
- If there are no trading pairs in the network for the two currencies in exchange, then Stellar will each for offers on the network, leading into a chain of conversions, ultimately resulting into the desired currency (for e.g. USD to SGD, SGD to AUD, AUD to EUR).
Key promise of Stellar Lumen, the team, and important developments:
A few stand-out strong reasons for using Stellar Lumen are as following:
- The ease with which Stellar Lumen facilitates fund transfer across borders.
- The impressive speed: you can settle payment transactions in 2-5 seconds!
- It’s an environment-friendly blockchain that uses no mining, which is a differentiator that will stand out more in future, when you consider that an ETH mining rig can consume 8760 kWh per year!
Stellar.org is the non-profit organization that contributes to the development of tools and rolling out new transformation initiatives. Their mission is to connect people to low-cost financial services, also demonstrated by the low transaction fee that amounts to a very small fraction of a penny. The fee is really to deter malicious users from flooding the network with high volume of transactions, a tactic commonly known as Denial-of-Services (DoS). Stellar network will continue to function irrespective of the fate of Stellar.org, because of blockchain technology.
Lumens trade under both XLM and STR symbols.
Stellar.org is developing tools for low-bandwidth environments. The team has also embarked on a partnership with IBM and KlickEx for cross-border payments. In addition, Deloitte, Parkway Projects, and Tempo have started building services using Stellar’s network.
