Stellar (XLM) – cryptocurrency review
Cryptocurrencies are different, some are created to replace fiat money and oust all competitors from the market, others help to perform multicurrency operations around the world. For example, XLM cryptocurrency of the Stellar platform, due to its unique technology, is used as a “bridge” between various digital coins when direct exchange is not available.
Stellar lumens cryptocurrency allows you to perform instant transactions with a low commission. The project is quite popular in business circles, its main sponsor is the American company Stripe.
The first banking-oriented blockchain startup called Ripple (XPR) was launched in 2012. Cheap and practical cryptocurrency attracted the attention of investors and many predicted a great future for it. The XPR coin is present on the market and is still even one of the ten leaders, but still the Ripple Labs project is far from ideal, especially in terms of decentralization.
Blockchain engineers liked the idea of combining banks, payment systems and individuals within a single platform, and after Ripple developers published the XPR source code in 2014, a hard fork called stellarcoin (XLM) appeared on the network under pressure from the community. The cryptocurrency next year switched to its own protocol. Hard fork author Jed McCaleb called the internal coin of the stellar system – lumens.
The cryptocurrency received many favorable reviews, it was even called the “Ripple of a healthy person”. The founder of Stellar Lumens, who worked for many years at Ripple Labs, immediately stated that the project has no commercial goals. Control over the system is carried out by an independent organization, the Stellar Development Foundation. XLM is open source, and every programmer can participate in upgrading the platform.
Stellar Development Foundation Leadership Includes
- Patrick Collison, CEO of Stripe;
- Nicholas Barry – Master of Computer Science and Mathematics, a participant in the development of computer systems for Microsoft and Salesforce;
- David Mazires is a computer security specialist, one of the leaders of the Secure Computer Systems research group.
Technical Features Stellar
The Ripple consensus mechanism, whose fork was originally the Stellar Lumens cryptocurrency, uses Byzantine Resiliency (BFT). Its meaning is to keep the network operational, even if some of its nodes are disconnected or captured by hackers. In Ripple, this problem is solved by full control of the validators by the main node, which runs counter to Satoshi Nakamoto’s idea of decentralizing blockchain networks.
Each user of the Stellar crypto network can independently launch a node (transaction verification node) and select trusted nodes with which he is ready to cooperate. Together they form a “faction”, which, having gained a certain number of members, can become a “parliamentary majority” that controls the security of the system. The program code includes the complete freezing of the stellar blockchain with inadequate behavior of the nodes.
The process of executing transactions and generating new stellar lumens cryptocurrency blocks looks like this:
- The sender forms a transaction and it immediately takes into operation one of the active nodes.
- The node checks the sender’s wallet balance in order to avoid double spending, and transfers the transaction to the next node.
- The last of the nodes involved in the verification writes data to the blockchain, which is synchronized with other copies.
An operation is considered completed if 80% of the validators agree in 5 seconds. The fee is distributed among all the nodes that took part in the transaction processing.
Cross-currency transfers can be made in the Stellar cryptosystem. For example, when sending money to Argentina, you can buy lumens for rubles or dollars from a credit card, the recipient will receive local pesos. The same goes for any cryptocurrency, for example, you send Monero to the recipient comes Dash, or any coin you need.
For this, a system of anchors (intermediaries) is used that accept any deposit money and issue a loan in the appropriate currency, which can then be withdrawn by paying for the transaction in lumens. The Stellar blockchain stores information on the exchange of all currency pairs. The value ratio of various digital assets is available in the order book, which makes it easy to convert them during financial transactions. On the basis of Stellar, decentralized applications are created, ICO companies are held and smart contracts are executed. Examples of successful ICOs on the xlm platform are projects:
The capabilities of the Stellar technology are not as extensive as those of the Ethereum virtual machine, it is suitable for running simple dapps and the developers themselves acknowledge this.
The PoW consensus algorithm is not supported in Stellar. Mining lumens cryptocurrency on computing equipment is impossible, nodes are involved in creating blocks.
Advantages and disadvantages
Stellar was supposed to be a powerful tool for making cross-border payments anywhere in the world. The system combines banking instruments received from Ripple and its own decentralized protocol.
Key benefits of Stellar:
- High transaction processing speed – unlike the first cryptocurrency Bitcoin, in the Stellar system the transfer is sent immediately to the validator. Money is credited to the beneficiary’s account 5 seconds after making the payment;
- Low energy consumption – no mining, thanks to the implementation of the Stellar Consensus Protocol, the process of verifying transactions in the Stellar network is more energy efficient than with the Proof of Work (PoW) consensus algorithm;
- Easy access – XLM can be used for blockchain transactions in states where virtual assets are little known or are prohibited by the authorities.
Disadvantages of Stellar:
- Imperfect security system – in case of any suspicion of a hacker attack, the network freezes;
- Decline in cryptocurrency value – Stellar annual inflation is 1%;
- Low yield of node content;
- Limited capabilities for decentralized applications.
Most often, Stellar services are used by companies operating in the underdeveloped countries of Africa, with the exception of the IT giant IBM, which began working with Stellar in 2017.
It is easier and cheaper to launch an ICO campaign on the specialized XLM platform than on Ethereum, several young blockchain projects have already taken advantage of this. However, they do not represent any serious value.
Stellar cryptocurrency forecasts has both positive and negative, the future depends on the competitiveness of the project.
Cheap and quick to make transfers in any currency is a very popular service, and XLM cryptocurrency is beyond competition in this niche. The project is actively developing. The team is introducing new technologies and is working to eliminate shortcomings.
In 2018, the decentralized trading platform Stellar x began to operate, on which the stellar cryptocurrency is easily exchanged for another digital asset. The list of partners of the Stellar Development Foundation is constantly growing. The Shariyah Review Bureau (SRB) recognized that the stellar lumens protocol is in line with Islamic principles, enabling Stellar to provide services to citizens of the Persian Gulf and Southeast Asia.
The successes are quite high, but still Ripple is ahead of its fork in the technological race, and Bitcoin, Ethereum and Dash networks are more common. Weak marketing policies, the lack of an official wallet and an ill-conceived security system are the main factors behind Stellar’s low popularity.