The Stellar network is an open-source protocol that allows for the transfer of credit between different ‘gateways’ located on a public ledger. Gateways on the Stellar network are institutions that hold credits of a specific currency. One example of this is a bank that holds Australian dollars or US dollars. These gateways can then transfer credits between each other, allowing for instantaneous remittances and currency exchange (i.e. An Australian bank exchanging AUD for USD).
What makes the Stellar network distinct is its use of an internal currency, its cheap fees and its extremely fast speed. Unlike networks such as VISA or SWIFT, the Stellar network is able to process transactions, in real time, with little to no fees. It’s both the fastest and cheapest payment network using blockchain technology.
The Stellar network also comes with its own internal cryptocurrency (Lumens). The Lumen currency is useful as it provides liquidity and trust between gateways. For example, instead of an Australian bank having to trust that an American bank will credit it with USD in exchange of AUD, both banks can use Lumens without having to trust each other. The use of Lumens also means that banks and exchanges do not have to hold numerous volatile currencies to ensure that they are always liquid and able to process transactions.
Stellar is looking to become the most popular blockchain payment network ever. Recently Stellar announced a partnership with IBM, becoming IBM’s primary payment gateway. Through this partnership, Stellar will become the new payment gateway for international remittances between banks. It will be used for transfers between the Australian dollar, New Zealand dollar, British pound and numerous other currencies. Stellar is also being adopted by the auditing giant Delloite.
Stellar is not only a platform for large financial institutions but also for consumers and developers. The public nature of the Stellar network will allow developers to build applications (and smart contracts) that interact directly with banks and exchanges. The network and currency will also allow consumers to perform peer to peer currency exchanges on the network itself, avoiding the middlemen of banks and exchanges.
Stellar and its Lumens currency will not be leaving anytime soon. As its adoption continues to grow and banks being to see the potential of Stellar, Stellar may take over as the number one payment gateway and with it, Lumens will become the first transnational currency.