Longcaller

Stellar

Stellar offers cheap and fast payments via organization-powered gateways.

Stellar’s goals are similar to Ripple. They intend to help businesses make fast and cheap payments. Payments can be international, allowing foreign transfers.

Stellar uses federated Byzantine agreement (FBA) as a consensus method. It is based on quorum slices. Each node has its own quorum slice – set of other nodes that this node trust. When a new transaction appears, all nodes vote on whether this transaction is valid. Then, each node checks its quorum slice. If they agree that this transaction is valid, the node accepts it. Finally, when each group accepted the transaction, the whole system starts the confirmation process — stating that the transaction is correct and will appear on the ledger.

At the heart, there is Lumens. Lumens is a native cryptocurrency in a Stellar network, which means that it can be trustlessly transferred within Stellar’s blockchain. There were initially 100 billion Lumens. New Lumens are generated each week with an inflation rate of 1% per year. Stellar Foundation currently holds most of it but intends to distribute it to the network users.

Lumens solves two problems. First, it is an anti-spam protection, as each transaction require a small amount of coin, and each wallet should hold some lumens to make transactions. Second, it can be used as an intermediary between two currencies to improve liquidity.

Parties can issue their own assets. These assets can represent currencies, precious metals, stocks, goods, etc. Those who issue their own assets are called anchors. An anchor can be run by anyone: individual, business, or financial institution. If a user of the network trusts a particular anchor, he creates a trustline and can buy their assets with Lumens.

It worth to note that unlike Lumens, assets are actually a credit. When a user buys an asset in the Stellar network, he buys an obligation to get what this asset represents. The user believes that he will be able to trade an asset back in the future.

Anchors can set the level of control over the asset they issue. First, they can choose to require authorization. In that case, users should get permission from the anchor to hold this asset. Second, they can make the asset revocable. In that case, the anchor will be able to freeze the asset of any user. If an asset is frozen for a particular user, this user will not be able to send the asset to anyone except the anchor.

Users can trade assets. If one wants to trade asset A for asset B at price X, he creates an offer. List of all offers between a pair of assets is called orderbook. When two offers match, they are executed and removed from the orderbook. To provide better liquidity, applications that allow trading can execute multiple offers at once. For example, if someone wants to trade A for C, he can first trade A for B, and then B for C. Stellar allows trades like this to be atomic, so either both trades will success or both will fail.

Coins generated by inflation and collected as fees are distributed by voting. All accounts can vote. The more coins the account has, the more powerful its vote. Those accounts who received more than 0.05% of total votes receive part of the distributed coins based on how many votes they received. The distribution of new coins is limited to once a week.

Timeline

  • July 31, 2014: Launch on Bitcointalk. bitcointalk.org
  • November 24, 2014: First commit on Github. github.com
  • December 5, 2014: Ledger fork. The fork was due to the failure of consensus algorithm. stellar.org
  • October 7, 2015: Release of the new consensus algorithm, Stellar Consensus Protocol, which is based on the federated Byzantine agreement. The update also introduced batching operations and multisignature accounts. stellar.org
  • April 12, 2016: Release of version 0.5.0. This update introduced DataEntry, which allows attaching arbitrary data to the account. github.com
  • April 26, 2016: The first giveaway of Lumens to Bitcoin holder. stellar.org
  • June 27, 2016: Partnership with Deloitte. stellar.org
  • October 3, 2016: Results of the first Stellar Build Challenge. The goal of the challenge is to make usable anchors, exchanges, and applications. stellar.org
  • September 7, 2017: Introduction of the Stellar Partnership Grant Program. The main goal of this program is to incentivize organizations to run anchors and exchanges. stellar.org
  • October 15, 2017: Partnership with IBM and KlickEx. stellar.org
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