{"id":470896,"date":"2021-09-04T18:27:04","date_gmt":"2021-09-04T18:27:04","guid":{"rendered":"https:\/\/wncen.com\/?p=470896"},"modified":"2021-09-04T18:45:04","modified_gmt":"2021-09-04T18:45:04","slug":"an-introduction-to-stellar-and-xlm","status":"publish","type":"post","link":"https:\/\/wncen.com\/news\/stellar-xlm\/an-introduction-to-stellar-and-xlm\/","title":{"rendered":"An Introduction To Stellar And XLM: Mission, Control, And Consensus"},"content":{"rendered":"

This project is an enigma. On the one hand, Stellar is not for profit, it doesn\u2019t have owners or shareholders, and strives to be somewhat decentralized. On the other, Stellar is a compliance-focused protocol, and its directors often meet with shadowy organizations like the World Economic Forum. According to <\/span>their website<\/span><\/a>, the protocol seeks \u201c<\/span>to unlock the world\u2019s economic potential by making money more fluid, markets more open, and people more empowered.<\/span><\/i>\u201d Fine, but, at what cost?<\/span><\/p>\n

Related Reading | Stellar To Power VISA\u2019s New Partnership, XLM Begins Breakout<\/a><\/strong><\/em><\/p>\n

According to the legend, Stellar is a Ripple fork. However, as you\u2019ll see below, that\u2019s not exactly true. <\/span>F<\/span>ounder of the infamous Mt. Gox cryptocurrency exchange and co-founder of Ripple, <\/span>Jed McCaleb<\/span>, launched Stellar in 2014. Stripe financed the initial operation.\u00a0 Joyce Kim, a lawyer, is his partner in the venture.\u00a0<\/span><\/p>\n

The native currency of the whole ecosystem is called Lumen or XLM.<\/span><\/p>\n

Stellar\u2019s Mission And Approach<\/span><\/h2>\n

Securities.io interviewed<\/span><\/a> the recently appointed CEO and Executive Director of the Stellar Development Foundation, Denelle Dixon. \u201c<\/span>The vision is big: Stellar and SDF hope to unlock the world\u2019s economic potential by making money more fluid, markets more open, and people more empowered<\/span><\/i>,\u201d she told them.<\/span><\/p>\n

On <\/span>its website<\/span><\/a>, the organization justifies its existence. \u201c<\/span>The way the global financial establishment is structured today, people are born into an economy just like they\u2019re born into a political system. Stellar is a way out: it lets people participate in a worldwide, stable, financial network regardless of where they live<\/span><\/i>.\u201d<\/span><\/p>\n

The controversial aspect is Stellar\u2019s approach. It\u2019s completely opposed to the cryptocurrency ethos. The company wants to build a bridge between the traditional banking system and the cryptocurrency space, but by following the traditional banking system\u2019s rusty rules. \u201c<\/span>The software has always been intended to enhance rather than undermine or replace the existing financial system<\/span><\/i>.\u201d\u00a0<\/span><\/p>\n

In other words, Stellar aims to provide a platform with which all financial actors can interact without any friction. All financial actors that are properly identified and approved by the legacy system, that is.\u00a0<\/span><\/p>\n

What Is The Stellar Consensus Protocol?<\/span><\/h2>\n

As a consensus mechanism, Stellar doesn\u2019t use Proof-Of-Work or Proof-Of-Stake. It uses its own Stellar Consensus Protocol (SCP.) For a formal definition, let\u2019s quote<\/span> the paper that Stellar presented<\/span><\/a> at the Symposium on Operating Systems Principles.\u00a0<\/span><\/p>\n

\u201cWith SCP, each institution specifies other institutions with which to remain in agreement; through the global interconnectedness of the financial system, the whole network then agrees on atomic transactions spanning arbitrary institutions, with no solvency or exchange-rate risk from intermediary asset issuers or market makers.\u201d<\/span><\/p><\/blockquote>\n

And, what does the Stellar Consensus Protocol accomplish exactly?<\/span><\/p>\n

\u201cSCP lets Stellar atomically commit irreversible transactions across arbitrary participants who don\u2019t know about or trust each other. That in turn guarantees new entrants access to the same markets as established players, makes it secure to get the best available exchange rates even from untrusted market makers, and dramatically reduces payment latency.\u201d<\/span><\/p><\/blockquote>\n

For the system to function, Stellar relies on Federated Byzantine Agreements. For a description of what those do, let\u2019s <\/span>quote Bit2meAcademy<\/span><\/a>:<\/span><\/p>\n

\u201cFor the FBAs to function properly, participants must wait for the majority to reach a consensus. In this way, participants know which transactions are most relevant before starting to settle them. So when the majority of the network takes a position, the network accepts the transaction and makes it unfeasible to roll it back for an attacker.<\/span><\/p><\/blockquote>\n

In other words, the Stellar Consensus Protocol tends towards centralization and just ignores most of the problems that Proof-Of-Work solves. It does use significantly less energy, though.<\/span><\/p>\n

\"XLMUSD<\/p>\n

XLM price chart for 09\/04\/2021 on Bitfinex | Source: XLM\/USD on TradingView.com<\/a><\/pre>\n
Key Characteristics Of The Stellar Blockchain<\/span><\/h2>\n