An introduction to Stellar and XLM: mission, control and consensus

This project is an enigma. On the one hand, Stellar is not for profit, has no owners or shareholders, and strives to be somewhat decentralized. On the other hand, Stellar is a compliance-driven protocol, and its directors often run into obscure organizations like the World Economic Forum. According to their website, the protocol asks “unleash the world’s economic potential by making money more fluid, markets more open and people more empowered.“Good, but at what cost?

Related reading | Stellar to fuel new VISA partnership, XLM begins its breakthrough

According to legend, Stellar is a Ripple fork. However, as you will see below, this is not entirely true. Ffounder of the infamous Mt. Gox cryptocurrency exchange and co-founder of Ripple, Jed mccaleb, launched Stellar in 2014. Stripe funded the initial operation. Joyce Kim, lawyer, is his partner in the business.

The native currency of the entire ecosystem is called Lumen or XLM.

Stellar mission and approach

Securities.io interviewed recently appointed CEO and Executive Director of the Stellar Development Foundation, Denelle Dixon. “The vision is big: Stellar and SDF hope to unlock the world’s economic potential by making money smoother, markets more open, and people more empowered., she told them.

At his website, the organization justifies its existence. “The way the global financial establishment is structured today, people are born into an economy just as they are born into a political system. Stellar is a way out: it allows people to participate in a stable global financial network, no matter where they live. “

The controversial aspect is Stellar’s approach. This is completely opposed to the ethics of cryptocurrency. The company wants to bridge the traditional banking system with the cryptocurrency space, but following the rusty rules of the traditional banking system. “Software has always been intended to improve rather than undermine or replace the existing financial system. ”

In other words, Stellar aims to provide a platform with which all financial players can interact without any friction. All financial actors who are correctly identified and approved by the old system, ie.

What is the Stellar Consensus Protocol?

As a consensus mechanism, Stellar does not use proof of work or proof of stake. It uses its own Stellar Consensus Protocol (SCP.) For a formal definition, let’s cite the paper that Stellar presented at the Symposium on Principles of Operating Systems.

“With SCP, each institution specifies other institutions with which to stay in agreement; thanks to the global interconnection of the financial system, the entire network then agrees on atomic transactions covering arbitrary institutions, without solvency or exchange rate risk on the part of issuers of intermediary assets or holders of securities. Marlet.

And what exactly does the Stellar Consensus Protocol accomplish?

“SCP allows Stellar to atomically commit irreversible transactions between arbitrary participants who do not know or trust each other. This in turn ensures that new entrants have access to the same markets as established players, achieves the best available exchange rates even from unreliable market makers, and dramatically reduces payment latency.

In order for the system to work, Stellar relies on the Byzantine Federated Agreements. For a description of what they do, let’s see Bit2meAcademy quote:

“For FBAs to work properly, participants have to wait for the majority to reach consensus. This way, participants know which transactions are the most relevant before they start to settle them. Thus, when the majority of the network takes a stand, the network accepts the transaction and makes it impossible for an attacker to cancel it.

In other words, the Stellar Consensus Protocol tends towards centralization and simply ignores most of the problems that Proof-Of-Work solves. However, it consumes much less energy.

XLM price chart for 09/04/2021 on Bitfinex | Source: XLM/USD on TradingView.com

Key features of the stellar blockchain

  • Almost all Stellar validators are corporate entities of some sort. Or are maintained by the Stellar Development Foundation. Nevertheless, “anyone can install the Stellar software and join the consensus process.
  • Each Stellar Lumen account must contain a minimum of XLM. This minimum balance protects the network from spam accounts.
  • Stellar Lumen’s mission is to pay for gas to conduct operations within the Stellar ecosystem.
  • The Stellar ecosystem was not designed for direct payments. The idea is to provide a platform that acts as an intermediary in the exchange of currencies.
  • The system “does not favor any particular currency. “
  • The code is open source and auditable by anyone.
  • The Foundation helps maintain Stellar’s code base, supports the technical and business communities around Stellar,” Great! “And is a privileged interlocutor of regulators and institutions, ow.
  • Stellar recently signed a partnership with “crypto-asset risk management solutions”Elliptic firm. That means, “Elliptic monitoring, compliance and analytics software now includes support for XLM, Stellar’s native asset. “Ouch.
  • With the recent update of Protocol 13, Stellar enables “control end of authorization of assets. “This means that the issuer of an asset can withdraw authorization from accounts and not let them use the asset. This means, more control and authorizations.
  • The Lumens had an inflation rate of 1% per year. In September 2019, Stellar removed inflation from the Lumens. Additionally, the Stellar Development Foundation burned 55 billion Lumens.

So, is Stellar a Ripple Fork?

In its FAQ, the organization goes back to its origins:

“The old Stellar network was launched in July 2014. The node software (stellard) was a modified fork of the Ripple node software (wrinkled). The ledger was completely new and did not contain any history of Ripple’s network.

Related reading | Stellar will present the AMM feature, what it means for its ecosystem

So the software was originally based on Ripple, but the ledger was brand new. Nonetheless, in 2015, when they released the Stellar Consensus Protocol, they rewrote the software from scratch. As of this moment, Stellar does not share any code with Ripple.

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