Enter Stellar: an Open Protocol for Payments

Stellar is an open protocol to achieve the following:

Store, prove possession, transmit value.

Digitally represent existing currencies and assets

make payments interoperable across institutions and currencies

Create a scalable payment system

Stellar is a open distributed ledger comprising different servers running the Stellar Core software. Like a traditional ledger, the Stellar ledger records a list of all the balances and transactions belonging to every single account on the network. Stellar Core maintains a local copy of the network ledger and communicates with other instances of Stellar Core on the network to stay in sync. Any one can run a Stellar Core server. Changes to the ledger will be broadcasted to all servers.

R ate3 tokens (RTE) will be used as a medium of exchange for cross-border settlements, store-of-value for rewards and incentive programs organised any network participant and facilitate credit scoring in the network.

This article explains further on how the Rate3 network utilise the features of Stellar to implement these use cases:

Fast and scalable

The median transaction confirmation time is 3 to 5 seconds with a rough 3,000 transactions per second. This is possible via Stellar’s unique consensus mechanism —the Stellar Consensus Protocol which relies on message passing.

Decentralised

The Stellar network does not depend on any single entity. The idea is to have as many independent servers participate in the Stellar network as possible, so that the network will still run successfully even if some servers fail. Any entity can run a Stellar server.

Interoperable

The Stellar servers communicate and sync with each other to ensure that transactions are valid and get applied successfully to the global ledger.

Fungible

Let’s say Deutsche Bank had put €1 billion into colored coins on Bitcoin. Suddenly, after a fork (e.g. bitcoin vs. bitcoin cash), there would be €2 billion IOU’s in the wild. The people on each side of that fork would not roll over and die, and it’s not simple to say “Oh, whoever Deutsche picks wins.” Or even “Whoever has the strongest chain wins.” I have a hard time imagining a company would ever take that risk. I worry big companies would never dare to put anything real-world redeemable directly onto, say, Bitcoin or Ethereum, for this reason.

The Stellar federated consensus story has Deutsche Bank as an actual player on the network. If you want DB redemptions then you would include them in your trust lines / quorum slices, and if Stellar fell apart and became partitioned, you would stay on DB’s side. All said, it seems significantly faster and more stable for cryptocurrency-to-real-world mappings, both for the consumer and counterparty.

Easy to exchange

SDEX for currencies and even assets on the Stellar network

Easy to adopt

Open source and no setup fees.

Secure

Stellar uses industry-standard public-key cryptography tools and techniques, which means the code is well tested and well understood. All transactions on the network are public, which means the movement of funds can always be audited. Each transaction is signed by whomever sent it using the Ed25519 algorithm, which cryptographically proves that the sender was authorized to make the transaction.

Many other ways to secure payment infrastructure integration with Stellar https://www.stellar.org/developers/guides/security.html

In addition to the public ledger being tamper-proof, Stellar has additional security features:

On a macro network level, the nature of SCP (being a FBAS) is such that each Stellar network node can choose any number of nodes to validate their transactions. This set of trusted nodes form a quorum slice in the consensus protocol. (More accurately, you should only trust nodes that you think are not in collusion with your other trusted nodes).

Stellar also uses industry-standard public-key cryptography tools and techniques that are well tested and understood. Each transaction is signed by whomever sent it using the Ed25519 algorithm.

On a more micro level, Stellar accounts also have to explicitly trust an asset issuer before it can hold the asset. There is also support for multi-signature contracts which require more than one weighted signature to sign an operation for it to be valid, according to the operation/account threshold. Moreover, Stellar optionally allows issuers to reserve the ability to freeze tokens in the event there is misuse.

Stellar contracts are also less expressive than Ethereum. Stellar contracts are based on atomic multi-operation transactions. While it loses the full generality of Turing-complete smart contracts like Ethereum, it has fewer pitfalls and hence can improve the security of the system and lead to more auditable code. Many blockchain hacks were due to exploits in smart contract vulnerabilities which are hard to fix as it is published on the blockchain.

Open-Source

Stellar code is also open-source, which means it can be publicly viewed, audited and improved.