The foreign market exists all around the world eg, small shops inside the airport and banks. Their function is to allow users to exchange one pair for another. Lately, Forex technology has improved many folds. It has allowed Forex markets to be used for arbitrage, international arbitrage, and portfolio diversification.
Now, imagine a foreign exchange market with crypto assets and fiat currencies together. Stellar (XLM) is a blockchain protocol that offers precisely that. Let’s dive into it!
Meet Stellar
Before, we understand how to use stellar to your advantage. Let us understand what it is!
Stellar is a crypto protocol with foreign currency, stock, securities, and crypto exchange capabilities. It can be used to send digital money domestically and across borders. It also offers cheap and lightning-fast transactions that work with all kinds of money. For example, the U.S. dollar, the Euro, Bitcoin (BTC), etc.
Unlike other crypto assets, Stellar does not aim to replace the current financial system. Instead, it aims to allow the world’s financial systems to work together on a single network. Stellar allows anyone to issue new assets and exchange them for other assets. This can be done using the built-in asset exchange features on Stellar.
Stellar: The Genesis
The story begins when Jed McCaleb and Joyce Kim left Ripple in 2013. They left due to some internal conflict over Ripple’s vision. In 2014, both of them forked the Ripple protocol to launch Stellar. This led to the creation of a non-for-profit Stellar Development Foundation (SDF). The foundation was created in a joint effort with Stripe CEO Patrick Collison.
He invested $3 million into the foundation as seed funding. The SDF foundation aimed to create an affordable financial system. In doing so, SDF wanted to enable people from all income brackets to have affordable and secure access to financial services.
In 2014, the Stellar network created a new consensus protocol called the “Stellar Consensus Protocol”. It was developed by Stanford Professor Davis Mazières. Professor Mazières works as the chief scientist at the Stellar Development Foundation.
How Does Stellar (XLM) Work?
The Stellar Ecosystem allows users to issue assets and exchange them. The issuance of assets is done by anchors. Anchors are also responsible for redeeming the assets. Anchors are trusted units that issue digital credits in exchange for assets on the Stellar network. They do this in exchange for deposits of an asset with anchors. Anchors also control the fees for their services on the network.
Read About: Blockchain Technology And The Digital Asset Ecosystem
Anchors are responsible for enabling real-world asset exchange while maintaining wallet balances. They use a distributed exchange to ensure this exchange. This exchange maintains a book for every traded asset pair. You can use Anchors to issue any type of assets including stocks, currencies, crypto assets, etc.
In order to secure the network, Stellar uses a consensus mechanism called Stellar Consensus Protocol (SCP). It is the first protocol that can allow a safe Federated Byzantine Agreement (FBA) blockchain protocol. FBA is an implementation of a new consensus mechanism developed by Ripple.
In FBA, each byzantine is responsible for its own blockchain in order to avoid the failure of the system. It is used to provide high throughput, network scalability, and low transaction costs.
The XLM Token: A Snapshot
The native token of the Stellar network is the XLM token. The XLM token is used as a medium of exchange for services. The XLM token holders can also pay for transactions using XLM. It also helps to ensure the authenticity of players. Users that have a minimum of 1 XLM are assumed to be authentic. The XLM token is also used as a bridge currency. This is because XLM does not require an Anchor.
It is also used to provide liquidity on the network. Moreover, it can be used to earn rewards by staking it on the network. This in turn helps provide network security.
Final Thoughts
Stellar is an open-source protocol for financial transactions. It aims to become the single network where the current financial system can be hosted. It has foreign currency, stock, securities, and crypto exchange capabilities. Users can use it to send digital money domestically and across borders.
It also offers cheap and lightning-fast transactions that work with all kinds of money. For example, the U.S. dollar, the Euro, Bitcoin (BTC), etc. The native token on the protocol is the XLM token. It is used as a medium of exchange and provides liquidity to the network. You can now buy the XLM token on ZebPay crypto exchange platform!
