You have probably heard about Stellar the currency from a friend or the internet maybe. Well, if you still don’t understand what Stellar is this article is in your best interest. Keeping in mind, Stellar is useful and valuable because it is a global exchange network.
The network is capable of hosting thousands of exchanges between currencies and tokens per second. After all, exchanging between cryptocurrencies and/or fiat currencies can be a lengthy and expensive process.
Stellar makes exchanging swift and cheap through its XML algorithm. XLM is the asset used and that will be supported within the Blockchain Wallet. Especially to pay transaction fees and maintain accounts on the Stellar network.
What is Stellar?
Stellar is an open-source, decentralized payment protocol that allows for fast, cross-border transactions between any pair of currencies. And like other cryptocurrencies, it operates using blockchain technology.
In other words, it’s a digital currency that has a protocol with the open-source program for exchanging values and distributing global payments infrastructure. And in order to reach a consensus on transactions so quickly and accurately, it uses its own unique consensus method. ‘I’ll explain more later.’
Its native asset, a digital currency, is called lumen (XLM). XLM powers the Stellar network and all of its operations, similarly to how ether (ETH) powers the Ethereum network. Transactions that take place on the Stellar network are added to a shared, distributed, public ledger. This is a database accessible by anyone worldwide.
Stellar Lumens trades under both the XLM and STR ticker. The Stellar team changed the ticker from STR to XLM a while back, but some exchanges, such as Poloniex, haven’t bothered to change it. Bittrex, Poloniex, and Binance account for a vast amount of XLM’s trading volume.
Binance and Bittrex support both ETH and BTC trading pairs, while Poloniex supports BTC, USDT, and USDC only. If you’d like to purchase XLM with USD or EUR, it’s worth taking a look at Kraken.
How does Stellar work?
First of all, Stellar is designed as an open-source protocol that is efficient for money transfer. Where certain servers are put in place to facilitate the implementation of the software compatible within its set protocols. In addition, their internet connectivity is used to connect to other users globally.
Secondly, this connectivity forms a global exchange network for the values. Whereby, each of the connected networks keeps a clean record of all the accounts in that particular network. And all the records from each network are stored in databases known as ledgers.
Additionally, there are servers put in place to take care of the ledgers and make propositions to the accounts. They are in turn moved from the current state to another simply by spending the balance in one account.
In other cases, they make changes to the properties of the propositioned accounts. Then again, all servers are required to agree on the transactions set to use on the ledgers. And all this happens in progress through a process known as the Stellar Consensus.
What is the Stellar Consensus?
The consensus method allows for fast and cheap transactions. With everyone on the network reaching agreement about transaction validity within a few seconds. Every participant (called a node) who helps add its transactions to the global ledger chooses its own mini-network.
In addition, it comprises a network of other trusted participants that it agrees with. And as long as these mini-networks (called quorum slices) overlap, the overall Stellar network can reach an agreement.
This consensus process happens regularly which is always at an interval of about two to four seconds. This way, all the servers get access to the copy. And, therefore, can synchronize the data and produce an identical copy.
The design and upgrade systems in the Stellar are all aimed at compensating for the drawbacks the consumers experience with Ethereum. And this why they have come up with a more advanced platform known as the Stellar XLM.
What is Stellar XML?
Stellar XLM, also known as Lumen is the native asset meaning it is built into the stellar ecosystem. Not to mention, by 2014 during its launch, there were a hundred billion Stellars which were considered as the original Lumens.
After the upgrade in the year 2015, the Stellars were converted to Lumen. A strategic plan by the company to separate its non-profit and the currency of the network. It’s important to remember, Lumens are necessary for the network because of different reasons.
For instance, preventing spammers from overloading the network. This is made possible because of the minor fee for every transaction (0.00001 Lumen per transaction). The network authenticates its users hence the network has only legit users. All this is made possible by the fact that every user is required to have at least 30 Lumens to open an account.
On the upside, Lumens are quite easy to use since they conduct multiple transactions in different currencies. And if the market isn’t large enough in 2 corresponding Lumens, the user can bridge the Lumens. You have the choice of buying Lumen from different exchanges hence you do not require a liquid market.
What are Lumen Wallets?
Most of the cryptocurrency enthusiasts are expecting more from this coin since it has one of the best features in the cryptocurrency world. We all know that in this world of cryptocurrency, the future is very unpredictable.
Therefore, we can only anticipate a brighter future for this coin especially since the founders are experts in the cryptocurrency world. The Stellar Cryptocurrency is supported by different wallets but the safest one you may opt for is the ledger hardware wallet.
Other wallets can also support stellar cryptocurrency where you can transact by buying and selling the crypto in different currencies. Always check for the best wallet that will suit your needs. It is quite easy to use. You just simply create an account in their wallet and you are able to buy and sell money through it.
There are various sequential steps you can obviously check out on their websites. Most of the wallets used to store XML are either XML specific or exist within Stellar’s network for use with its global marketplace. Stronghold, for instance, is the distributed exchange built into Stellar’s system.
And StellarTerm is a client that allows you to access the distributed exchange to trade or send funds.
The Stellar Consensus Protocol (SCP)?
In the beginning, Stellar sourced its inspiration from the protocols of the Ripple Lab. And, recently, it has been able to stand on its own creating an entirely independent network system.
It’s the kind of technology that connects people from all over the world. Using diverse payment systems, as well as banking systems. And its main aim is to develop and connect the world. In particular, it lets you facilitate multi-currency systems and transactions for assets as quickly and reliably as possible.
This is all made possible for fractions of a penny with the help of its crypto-assets Lumen (XLM) as the anchor. Stellar has four key aspects when it comes to adding transactions to the ledger, or blockchain.
The key aspects include;
- Participation Freedom: Anyone can join the consensus process. And no one has all or a majority of the decision-making power.
- Low Latency: It offers fast and cheap transactions that are confirmed within a few seconds.
- Trust Freedom: Nodes (participants in the consensus system) choose their own set of trusted nodes. And can revoke trust from bad actors at any time.
- Limitless Safety: Even if nodes fail or even bad actors join the network, consensus can still be reached. And the network will come to the right conclusion.
Different from BFT, Stellar’s consensus mechanism is a type of Federated Byzantine Agreement (FBA) referred to as the Stellar Consensus Protocol (SCP). And on its network, faults come in the form of faulty or malicious nodes.
Basically, Stellar can provide safety or a guarantee that nothing undesirable, such as a fork of the network, will ever happen. Eventually, if there is ever a discrepancy – if a quorum (the set of nodes sufficient to reach consensus) can’t agree on what should be put in the ledger automatic cease action takes place.
Meaning that the entire network will cease operations until a consensus is reached. But, as mentioned above, this kind of outcome is rare. Obviously, because of the way that nodes are able to choose a set with other, trusted nodes to belong to. This subset of trusted nodes is called a quorum slice.
What is Quorum and Quorum Slices?
A Quorum is a group of nodes that initiates an agreement. Nodes do communicate with each other with the purpose to reach the agreement. And if a specific threshold of nodes is met, then an update on the state is valid will be concurred.
On the other hand, a Quorum Slice is defined as the subsets of a quorum. And they can convince a few nodes of the agreement. The dependency of a node can be on many quorum slices for information. The establishment of the trust is done within the configuration file of the node.
Dynamically, quorum slices and subsequent decentralization can be formed. For example, Node A can have no trust in banks after its research. It can now require another quorum slice on whom it can rely on for an agreement with banks.
The requirement of traditional BA is that all nodes accept the same slices. Traditional BA doesn’t require that all the nodes discern sources of trusted information for themselves only. Distinguishing slices and quorums is difficult as there is no way to distinguish them.
The dependency of the FBA model is on individual nodes for the selection of their own sets of quorum slices.
How do Nodes work in Quorums?
By definition, a Node can be a couple of different things depending on whether the conversation is about computer science or networking. In Networking a node is either a connection point, a redistribution point, or a communication endpoint. While in Computer Science, nodes are devices or data points on a large network, devices such a PC, phone, or printer are considered nodes.
So, in general, a node has either a programmed or even an engineered capability. In that case, enabling it to recognize, process, or forward transmissions to other nodes.
Overlapping quorums are led by these good quorums and Nodes select quorum slices. Ensuring that the quorum slices do not violate quorum intersection is a responsibility of the nodes. The requirement is that nodes should select those slices which are not only conservative but also lead to large quorums.
Disjoint quorums are not good quorums. They can lead to contradictory statements and a consensus can be undermined. Safety and liveness need to be balanced by nodes with the purpose of ensuring a proper slice selection process.
Lastly, if nodes externalize values that cause contradictions with other nodes, then the safety will be lost by the nodes. A critical role is played by the Federated Voting Model related to nodes who agree on a statement.
Why is Stellar important?
Like (almost) all other Cryptocurrencies, Stellar bears that beautiful buzzword that has become the hallmark of blockchain technology: decentralization. The network runs on a web of decentralized servers supported by an international consortium of individuals and entities. These servers support the distributed ledger that keeps track of the network’s data and transactions.
In practice, the Stellar protocol functions like a more inclusive, more flexible PayPal. To start using it, you need to upload funds to an anchor on the network. Much like a bank or PayPal, this anchor then holds your money and issues credit to your virtual wallet in its stead.
You might be wondering why you need to exchange debit for credit with an anchor in the first place. Well, anchors serve as a bridge for any given currency and the Stellar network. The swap allows you to formally convert your funds into Stellar’s public ledger.
This integration means you can send funds instantly on the network without having to wait for a bank transfer, as with PayPal. It also streamlines cross-border payments. Let’s say you wanted to send funds to your impoverished ex-pat brother living in the UK. You would use your credited USD balance to shoot him the funds through the Stellar network.
Stellar would then automatically convert the USD to EUR using the lowest exchange rate. And after receiving the transfer, he can withdraw the funds from an anchor that supports EUR and go about living his Bohemian lifestyle.
Jed McCaleb is the genius behind Stellar. The creator of the eDonkey network and pioneer of the Bitcoin as well. And together with his female counterpart Joyce Kim they founded Stellar in 2014. Joyce was also a marketing activist in the Crypto world.
When the currency was first launched it was entirely based on the Lab protocol for the Ripple Currency. And after a few improvements on its consensus code, it was able to implement an independent network system.
After some time, the Stellar Development Foundation came up with a new updated version of the consensus algorithm. This was fully based on a wholly new coding algorithm. In November the same year, the upgraded Stellar’s Network System went live in the Cryptocurrency world.
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What do you think about Stellar?
Do you think it’s a worthwhile system? Please, feel free to share your thoughts in the comments section below this blog.
Finally, in order for a distributed system like blockchain to be secure and to scale, safeguards (like the Stellar Consensus Protocol) must be in place. Especially to sustain potential failures and attacks by bad actors.
The Stellar team has also created a Desktop Client that is specific to the XML currency. If you’re looking for a non-Stellar-exclusive wallet, the Ledger Nano S is probably the safest bet. But if you don’t have this hardware wallet, you could check out stargazer, Papaya, and Saza.
In a recent promotional stunt, Blockchain added support for XML and gave away $25 worth of XML when you verified your identity.