Stellar is an open-source, decentralized network designed to make global financial systems interoperable. It facilitates the creation, sending, and trading of digital representations of any form of money, aiming to combine the power of blockchain with user-friendly, efficient transactions that integrate seamlessly with existing monetary infrastructures.
Understanding the Stellar Network
Launched in 2015, the Stellar network has processed over 450 million transactions from more than 4 million individual accounts. It was created by Jed McCaleb, who also co-founded Ripple (XRP). While Stellar Lumens (XLM) originated as a fork of Ripple's protocol, it has since developed its own unique codebase and distinct ecosystem.
Key Properties and Terminology
To effectively navigate the Stellar ecosystem, it's helpful to understand its core terminology:
- Lumen (XLM): The native digital currency of the Stellar network.
- Stroop: The smallest unit of a lumen, equal to 0.0000001 XLM (similar to a Satoshi in Bitcoin).
- Ledger: Equivalent to a "block" in other blockchains, it records the state of the network at a point in time.
- Fixed Supply: The total supply of XLM was capped at 100 billion at genesis.
- Consensus: The network uses the Stellar Consensus Protocol (SCP), a variant of a Byzantine Fault Tolerance (BFT) protocol.
- Fees: A minimal per-transaction fee of 0.00001 XLM (100 stroops) is required to prevent spam.
Core Concepts and Functionality
Stellar's primary goal is to serve as a bridge between diverse financial systems. Its development is supported by the non-profit Stellar Development Foundation. Unlike proof-of-work blockchains, all 100 billion lumens were created at launch. The supply is now approximately 50 billion, with nearly 20 billion in public circulation and the remainder held by the Foundation to support ecosystem growth.
The Ledger System
A ledger on Stellar is a snapshot of the entire network's state, containing all accounts, balances, and orders. The first ledger is known as the genesis ledger. Each ledger header contains critical information, including:
- Version and previous ledger hash
- Transaction set result hash
- Ledger sequence number
- Total coins in existence
- Base fee and base reserve parameters
- A skip list for efficient historical ledger access
Ledger entries are categorized into four types: Account, Trustline, Offer, and Data entries.
Accounts and Transactions
Accounts are the fundamental data structure, identified by a public key and stored on the ledger. Each account must maintain a minimum balance of 1 XLM. Account fields include the account ID, balance, sequence number, and signers for multi-signature capabilities.
Changes on the network are executed through operations, which are grouped into transactions. A transaction includes:
- A source account and a fee
- A sequence number
- A list of operations
- Signatures and an optional memo
Stellar supports 13 core operation types, including creating accounts, payments, path payments, managing offers to buy or sell assets, changing trustlines, and merging accounts.
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Advanced Features of Stellar
Asset Issuance and Anchors
Any account can issue custom assets on Stellar, becoming what is known as an "anchor." When you hold an asset like a tokenized USD, you are holding credit from that specific issuer. To hold an asset, your account must first establish a "trustline" with the issuer, explicitly setting a limit for how much of that asset you are willing to hold.
The Decentralized Exchange (DEX)
A powerful built-in feature of Stellar is its decentralized exchange (DEX). Users can trade assets peer-to-peer through offers that function like traditional limit orders. The network's orderbooks record all outstanding offers.
A key innovation is the path payment, which allows a user to send one currency and have the recipient receive another. The network automatically finds the best conversion path across various orderbooks, enabling sending and exchanging money in a single, atomic transaction.
Stellar Smart Contracts (SSC)
While not as programmable as Ethereum, Stellar supports smart contracts expressed as compositions of transactions with specific constraints. These constraints can include multi-signature requirements, atomicity (where all operations in a transaction succeed or fail together), sequence conditions, and time bounds.
Technical Underpinnings
The Stellar Consensus Protocol (SCP)
SCP is the mechanism that allows the decentralized network to agree on transaction validity. It prioritizes safety over liveness; in cases of network partition or faulty nodes, the network halts until consensus can be safely reached again. SCP is known for its properties of decentralized control, low latency, flexible trust, and asymptotic security.
XDR (External Data Representation)
Stellar uses XDR, a data serialization format standard, for storing and transmitting data. XDR is compact, efficient for transmission, and ensures data is stored in a predictable order, which simplifies cryptographic signing and verification.
The stellar.toml File
To foster interoperability, organizations can publish a stellar.toml file on their web domain. This file acts as a public directory for their Stellar integration, announcing information like their validation key, federation server, and the assets they issue.
Development and Ecosystem
Stellar is renowned for being developer-friendly. Most applications interact with the network through Horizon, a RESTful HTTP API server. The Stellar Development Foundation provides extensive documentation, tutorials, and Software Development Kits (SDKs) for popular languages including JavaScript, Java, Go, and Python, making it easier to build applications on top of the network.
Network Statistics
The Stellar network continues to demonstrate significant growth:
- Over 29.9 million ledgers created.
- More than 4.5 million accounts active.
- A diverse ecosystem of over 7,000 different assets.
Frequently Asked Questions
What is the main purpose of Stellar?
Stellar is designed to facilitate fast, low-cost, cross-border payments and asset transfers. It acts as a decentralized platform for exchanging any form of currency, whether traditional fiat or digital, by making global financial systems interoperable on a single network.
How is Stellar different from Ripple (XRP)?
While both were created by Jed McCaleb and initially shared code, they have diverged significantly. Stellar is a more open, decentralized network focused on individual and small business use cases, remittances, and financial inclusion. Ripple often focuses on institutional and banking partnerships for settlement.
What are lumens (XLM) used for?
XLM is the native asset that serves several key functions: it pays for transaction fees, acts as a bridge currency in path payments, and helps maintain network security by requiring accounts to hold a small minimum balance, which prevents spam.
How do I create a custom asset on Stellar?
Any account can issue an asset by setting up a trustline. However, for others to hold your asset, they must first choose to trust your issuing account by creating their own trustline to it, specifying the maximum amount they are willing to hold.
Is Stellar environmentally friendly?
Yes. The Stellar Consensus Protocol (SCP) does not rely on energy-intensive mining. It uses a federated Byzantine agreement model that is extremely efficient, resulting in a very low carbon footprint compared to proof-of-work blockchains.
Can Stellar connect to traditional banking systems?
A core strength of Stellar is its ability to connect to real-world endpoints through "anchors." These are regulated entities that act as bridges, allowing users to deposit fiat currency and receive a digital representation of it on the network, which can then be sent or traded globally.
Conclusion
Stellar stands out in the blockchain space by prioritizing specific use cases in payments and asset exchange. Its efficient consensus mechanism, minimal transaction costs, and built-in decentralized exchange make it a powerful protocol for facilitating global financial interoperability. By providing robust tools for developers and a clear framework for asset issuance, Stellar continues to build a compelling ecosystem for the future of money. For those looking to delve into real-world blockchain applications for finance, Stellar offers a mature and capable platform.