Stellar Lumens – A Learning WordPress Site

An open network for moving money

1 – What is Stellar ?

Today’s global financial infrastructure has a big communication problem.
There are a lot of different currencies
- and a lot of different payment systems.
Each one speaks a different language
- so they have a hard time understanding each other.
- Which makes moving money slow and expensive
- and a lot gets lost in translation.
Stellar’s vision is to unite the world’s financial infrastructure
- so money can flow quickly and cheaply
- between banks, businesses, and people.
The internet connected the world’s computers
- so information could be shared globally.
Stellar is doing the same for money.
To accomplish this vision and ensure integrity and neutrality,
- Stellar is not a bank or a business.
Instead it’s a decentralized, open network supported by a non-profit foundation
- that handles every currency and speaks to every payment system
- in its native language.
That means businesses can move money in seconds,
- no matter what bank they use back home.
- And people all over the world can use Stellar to send money to family overseas
- to convert one currency to another
- or to make payments that are too small to cover fees
- traditionally charged by today’s institutions.
In the future, Stellar hopes that you won’t have to use traditional infrastructure
- to get your money where you want it to go.
Instead, you’ll just use Stellar.

What is Stellar ?
- A blockchain-based insurance
- (YES) A decentralized protocol that unites the world’s financial infrastructure
- A new system for file storage
- A crypto-lending platform
- A privacy-preserving cryptocurrency

2 – What are Stellar Lumens (XLM) ?

Stellar is a platform that connects banks, payment systems and people
- so they can easily move money anywhere in the world.
To help make this possible, Stellar has created a cryptocurrency, the Lumen.
- The lumen is the native asset of the Stellar network.
- It serves as a kind of universal translator between each currency.
Here’s how: Imagine a business in the United States needs to pay a supplier in China.
They’ve got US dollars in their bank in Kansas City,
- but they need the payment to show up as Chinese Yuan
  - in the suppliers’ account in Guangzhou.
- What can they do ?
They could send money the traditional way, via international wire transfer, but that’s slow –
- international wires take several days to clear – complicated –
- in many cases, funds move through multiple intermediary banks
- before reaching their destination – and expensive –
- each intermediary takes a percentage of the transaction in fees.
As money moves around the world, the fees pile up, and the business in Kansas City
- loses more and more of its hard-earned cash to unnecessary middlemen.
- As does the supplier in China.
By comparison, what if the business used Stellar ?
- Stellar has a decentralized exchange built right into the protocol.
It can route a payment in US dollars through its order books,
- so it comes out on the other end as Chinese Yuan automatically.
If there’s no good offer to exchange dollars to Yuan, Lumens act as an intermediary.
- Stellar simply converts dollars to Lumens
- and then converts Lumens into Yuan, all in under five seconds
- and for a fee of ten-thousands of a cent.
  - example: $0.64277600
In addition to serving as a universal currency translator,
- Lumens also protects the integrity of the network by preventing spam.
Transaction fees are paid in Lumens,
- and every Stellar account has a minimum balance, too.
- The transaction fees and minimum balance
  - are low enough that legitimate users don’t really notice them
  - but high enough to disincentive spammers.
Lumens are a critical component of the Stellar protocol.
- They allow it to be efficient, scalable,
- and they serve as a universal translator for assets.
So you can move funds cheaply, but not too cheaply –
- with the transparency and security only a decentralized blockchain can provide.
That’s a big step forward for financial infrastructure.
- All thanks to Stellar.

What are Stellar Lumens (XLM) used for ?
- Voting on interbank interest rates
- Paying for decentralized file storage
- Voting on the Bitcoin Lightning Network
- Creating financial derivatives
- (YES) Facilitating low-cost, universal payments

3 – Sending remittances with Stellar

For people sending money to family members overseas, Stellar offers a cheaper, faster alternative to traditional money transfer services.

This is Maria. She lives in the United States.
And this is Maria’s mom, Paulina. She lives in the Philippines.
- Today Maria wants to send her mom $20.
- This is called a remittance.
Remittances are money sent to support a family member in another country.
- And they are a very big deal.
The World Bank estimates that global remittances
- are over 600 billion US dollars every year.
Unfortunately for Maria, sending a remittance is pretty expensive.
Her bank in the US has no connection to her mom’s bank in the Philippines,
- so she has to use a money transfer service.
- Which means paying a lot of fees.
One popular American service charges a 3% conversion fee.
- And the transfer takes three to four days.
The same service also offers to do the transfer faster, but for an additional fee of $9.99.
If Maria used this service to send $20,
- it would mean half the amount would be spent on fees.
- That’s a huge percentage.
And Maria and Paulina are not alone.
- The average fee globally for remittances is 7.1% of the transaction.
- And there are millions of people who pay these fees every day.
But what if Maria used Stellar ?
- Stellar is a decentralized platform that unites banks, payment systems, and people
- so they can easily move money anywhere in the world.
If Maria used Stellar to send her $20 to Paulina,
- the Stellar network would convert her US dollars
- to Philippine Pesos in less than five seconds.
So Paulina would receive $20 worth of her local currency.
- Not $20 minus fees.
Stellar makes this possible by connecting financial institutions to the Stellar network
- which has a built-in order book that exchanges assets.
So Maria could send US dollars – or any other currency – to her mom,
- and it’s converted automatically to Philippine Pesos.
That’s the vision of Stellar.

Why is Stellar good for sending remittances ?
- Users can earn interest on the amount sent
- It can analyze your family’s financial activity
- Every Stellar transaction is fully insured
- (YES) Transactions are fast, inexpensive, and global
- It’s backed by national governments

4 – How banks, business, & people use Stellar

Stellar lets banks, businesses, and people turn traditional assets, like dollars and euros, into tokens. These tokens can then be transferred and exchanged with any other participant on the Stellar network.

Stellar is a platform that aims to connect banks, businesses, and people,
- far more efficiently than today’s financial infrastructure.
Let’s take a bank, a business, and a person – and show you how this works.
First up, the bank.
- This is Main Street Bank.
- To use the Stellar network, Main Street Bank sets up a Stellar account.
Then using Stellar’s built in tools,
- the bank hooks its existing infrastructure into the Stellar network.
Now the bank can take real world assets -like dollars, euros, or pounds –
- and turn them into Stellar tokens.
And their customers can deposit a US dollar in Main Street Bank,
- and get a US dollar token on Stellar in return.
All Stellar tokens are exchangeable.
- And since exchanges happen on the Stellar network.
- They only take a few seconds, and cost a fraction of a penny.
Anyone can transfer, store, and trade Stellar tokens
- just like Lumens, anywhere on the Stellar network.
So now the bank can take a dollar, turn it into a token,
- transfer it around the world in two to five seconds –
- and convert it back to a dollar again.
For banks, Stellar makes money transfers fast, simple, and inexpensive.
Next up, the business.
- Let’s call it ABC technologies.
ABC makes an app.
- They want to make it possible for the app’s users to buy and sell in-game items with each other using a single currency.
- To do that, they use Stellar to create a new token called the ABC token.
The ABC token is, in effect, a new cryptocurrency running on Stellar.
- It isn’t backed by a real world dollar like Main Street banks, but other than that, it acts entirely the same.
With Stellar, any business can create new tokens
- to reward customers and create new economies and markets, related to their brands.
Finally, we have people.
- This is Li.
  - She’s a big fan of ABC’s app and she wants to buy a new avatar.
  - Unfortunately, she doesn’t have any ABC tokens left.
  - So what does she do ?
- She uses Stellar’s built-in marketplace to buy some.
Li has US dollar tokens that she previously bought from Main Street Bank.
She transfers those into the ABC app, and instantly converts them into ABC tokens
- to buy her favorite avatar.
And if she has some US dollar tokens leftover
- she can return them to Main Street Bank
- and get her dollars back, right into her account.
Or she can hold on to them. Or trade them for another token.
Any asset can be turned into a token on Stellar.
- Traditional currencies.
- Cryptocurrencies.
- Real estate investments.
So whether you’re a bank, a business, or a person,
- Stellar makes it possible to quickly and efficiently
- issue, exchange, and transfer tokens in an entirely new way.

Why do banks and businesses use Stellar
- To maintain full insurance requirements
- To set LIBOR rates
- (YES) To issue, exchange, and transfer tokens quickly and efficiently
- To replace Amazon Web Services
- To avoid international financial regulations

5 – How does Stellar protect digital assets ?

Aka: “How Stellar protects digital assets”

Digital assets on Stellar are protected by a decentralized global network of computers running Stellar’s open source software. These computers cooperate to confirm legitimate transactions and prevent malicious ones.

Stellar is a platform that connects payment systems and people.
It’s a decentralized network – meaning no single company has the power to turn it off.
Stellar’s decentralized network is made up of all the independent computers that run Stellar’s software.
Anyone can join. Stellar’s network is different from Bitcoin’s in a few key ways.
Computers on Bitcoin’s network compete with each other to validate transactions through a process called mining.
This requires expensive hardware and lots of electricity.
Stellar doesn’t rely on mining, because when the networks miners disagree, the network can split in two.
This has happened in the past with both Bitcoin and Ethereum.
- Bitcoin, Bitcoin Cash
- Ethereum, Ethereum Classic
But because Stellar allows digital versions of real world assets –
- like digital Yen or digital bonds –
- Stellar had to devise a way to prevent the creation of duplicate versions
  - of those assets.
For example, if a dollar on Stellar were duplicated,
- its backing bank would suddenly owe TWO real world dollars.
  - One for each copy of the network.
- This would obviously be a problem.
So Stellar uses a unique way to settle transactions,
- developed by researchers at Stanford University.
Here’s how it works.
- Stellar relies on cooperation within the network, rather than competition.
Each company doing business on Stellar connects a computer to the Stellar network.
It picks a few other computers it always wants to agree with,
- it processes the transactions they process, and keeps its list of transactions aligned with theirs.
The computers the company depends on, in turn, have chosen to agree with others.
- And those ones agree with still other computers,
- and eventually the whole network is covered in an interlocking web of agreement.
It’s actually very similar to how the internet’s web servers work.
Stellar uses this pattern to guarantee the network’s safety.
Every five seconds, the connected computers negotiate with each other,
- according to very specific rules, to finalize their agreement.
They cross-check each other across the whole network, all at once.
The rules of the system have been designed so that even if bad computers participate,
- accuracy and stability are maintained
This agreement system is called the Stellar Consensus Protocol (SCP).
It allows computers running Stellar to process transactions in under 5 seconds,
- without using a significant amount of electricity,
- and for a very, very small transaction fee.
- ex: 0.00001000 XLM
So who runs Stellar nodes today ?
- Global banks.
- Developers.
- Business.
- Anyone who wants to transfer money via the Stellar network.
Stellar is simple to set up. Free to use. And above all: it’s open to everyone.
And that’s a big improvement over today’s international financial infrastructure.

How does Stellar Consensus Protocol work ?
- (YES) It relies on the cooperation of trusted nodes to confirm transactions
- It uses a randomized trust model
- It relies on competition within the Stellar network
- It uses a Directed Acyclic Graph (DAG)
- It runs on top of Bitcoin