- The Stellar network, due to its interoperability features, is consolidating as one of the main protagonists of the current financial transformation.
- Use cases, advantages, and scope of one of the most popular networks in the ecosystem.
The advancement of cryptocurrencies has transformed the global financial landscape, offering innovative solutions to long-standing problems such as efficiency in international transactions and accessibility to banking services. At the core of this technological revolution are Blockchain networks, decentralized systems that enable secure and transparent transfer of digital assets.
Why is it important to understand the role of these networks?
Because they allow us to understand more accurately with what tools the traditional financial system could evolve in the short term, and what new businesses are emerging, both for established financial institutions and startups.
Stellar network
Stellar Development Foundation is a nonprofit organization created to support the growth and adoption of the Stellar network, which is public and decentralized, fulfilling its mission to provide equitable access to the global financial system. Banks, payment systems, developers, and individual users can connect through this network.
Frecuencia Money interviewed Tori Samples, Senior Product Manager at this organization, who begins the conversation with this definition: “Some of the current financial systems are not designed to serve everyone; however, the Stellar network can provide access to a variety of financial services. This happens because, unlike other Blockchain networks, its design is specifically focused on transactions between fiat currencies and cryptocurrencies.”
One of Stellar’s main advantages is its ability to facilitate cross-border transfers, a crucial factor in countries where these are slow and costly. By leveraging a decentralized network of entry and exit points, Stellar allows money to be moved efficiently, directly impacting those who rely most on these services, such as rural or unbanked communities.
San Francisco, Colombia: a use case
The impact of Stellar is tangible in stories like that of Zac Borrowdale. This Australian entrepreneur founded two businesses in Colombia but faced extreme challenges when trying to pay wages to his employees in San Francisco, a town where most residents had no access to banking services. The risks of transporting large amounts of cash from Medellín culminated in an attack that nearly cost him his life. The solution came through Decaf and Stellar, which allowed him to pay his employees in digital dollars (USDC).
“The Stellar network has a global network of entry and exit ramps that allows people to move seamlessly between cryptocurrencies and fiat currencies.”
— Tori Samples
In this specific use case, employees could convert these assets into Colombian pesos through entry and exit ramps integrated with Moneygram Access. A documentary called “The Onchain Effect” was even filmed, telling the story of how access to financial services revitalized this local microeconomy by increasing economic activity and internal spending.
This exemplifies how Blockchain technology can overcome the limitations of traditional financial infrastructures, improving security and fostering economic inclusion in underserved communities.
“With access to digital dollars, people can earn and save money in a way that protects them from fluctuations and devaluation of local currencies, extending the value of their funds. They can receive payments in digital assets directly into their digital wallets. From this digital wallet, they can pay, save, send person-to-person payments, and convert to fiat currency. This creates a virtuous cycle effect that can lead to financial inclusion for individuals and communities,” concludes Samples.
Blockchain networks: highways of change
Blockchain networks are impacting four key dimensions of the industry:
- Costs
They significantly reduce costs and time associated with transactions, especially in international contexts. (They eliminate the need for correspondent banks and automate processes). - Security
Data recorded on Blockchain is protected by cryptography, preventing alterations and unauthorized access. - New business models
Through the creation of decentralized applications that are transforming industries like finance, logistics, healthcare, and entertainment. - Smart contracts
They allow agreements to be executed automatically, reducing human error and bureaucracy in real-time.
As a recent example, Mastercard is using the Stellar network to implement Crypto Credential, a tool for verifying interactions that allows users to send cryptocurrencies via email or phone numbers.
Stellar was launched in 2014 by Jed McCaleb (who previously co-founded the cryptocurrency company Ripple and left the company due to differences with his partners). The project’s initial goal was to process cross-border payments. In 2016, the technology consulting firm Deloitte announced a partnership with Stellar to develop a payment application. Later, 30 banks signed on to use this network for cross-border transfers. Wallets like Ejara, TruBit, EspressoCash, MoneyFlap, and OwlPay have integrated into the ecosystem during 2024.
Unlike Bitcoin networks, Stellar’s consensus protocol does not rely on a network of miners to approve transactions. Instead, it uses the Federated Byzantine Agreement (FBA) algorithm, which enables faster transaction processing. This is achieved by using “quorum slices” (a portion of the network) to approve and validate a transaction.
Unlike other cryptocurrencies, Stellar’s native token, Lumen, cannot be mined. These tokens are used to pay transaction fees on the network, store assets, and mint other tokens.
Several Blockchain networks are driving the transformative moment we are experiencing.
For example, Ethereum is known for its ability to run smart contracts and decentralized applications, making it a popular choice for financial application developers.
On the other hand, Ripple specializes in fast transactions between banks.
Binance Smart Chain offers a cost-effective and scalable alternative for decentralized finance (DeFi) applications.
Stellar differentiates itself by focusing on integrating fiat currencies with crypto assets, prioritizing financial inclusion in emerging markets and providing accessible access ramps for end-users.
As cryptocurrencies become a more integrated component of the global economy, these networks will play a more central role.
There is a significant shift towards a more inclusive, efficient, and resilient global financial system. Its current impact is just the beginning of a broader transformation in how the world interacts with money and financial services.