Stellar is a platform that connects banks, payments systems, and people. Their goal is to create a network that can move money (borderless) quickly, reliably, and at almost no cost. The Stellar Network is different from Stellar.org, the non-profit organization developing it.
The Stellar Network will continue to exist even if Stellar.org disappears. It is decentralized but not trustless as it is run by servers independent of each other around the world. The cheap transactions are possible by using the same concepts the traditional financial systems are build upon, depositing fiat to an anchor, who then issues credit to you. Paypal works this way. You deposit money to Paypal (an anchor) and they give you virtual credit in their centralized database. You can then pay online using that credit where it’s accepted. The receivers of the credit give it back to Paypal and receive fiat in their bank accounts.
The Stellar network works the same way, but instead of a single anchor, it is a network of anchors. You can deposit USD to one anchor, send your received credit to a friend abroad, who might choose to exchange the credit at another anchor for EUR or BTC. Transactions are fast, cheap, decentralized and efficient. However you need to trust the anchors and servers.
Lumens (XLM) is a token issued by stellar.org and is used to prevent spam attacks on the network. Each operation on the network costs 0.00001 XLM. Extremely cheap for legit users, expensive for spammers.
Swot analysis of Stellar
- Real-time settlement (2-5 seconds)
- Regulatory compliance
- International reach with a single integration
- Automatic currency exchange
- Cryptographically secure transactions
- Payments that move like email
- Great for micropayments: A $0.01 fee handles ~600,000 transactions
- Not trustless and based on credit
- Inflationary up until 100,000,000,000 tokens
- Stellar.org holds difference between circulating and max supply
- Stellar can and are leveraging their partnerships with IBM, Stripe and other big companies for mass adoption
- Not too different from current financial system but better (mass adoption)
- Network needs to grow huge to decrease counter-party risk from anchors
- Vulnerable to financial crises (anchors going bankrupt)
- Circulating supply will be inflated ~6x over the next decade