Any time that someone mentions banking and cryptocurrency in the same breath, talk of the Ripple payment protocol follows. That’s apt, given their market share within that space – but the Stellar payment network is gaining ground. The two are not in direct competition, but there are certainly overlaps. Considering Stellar Lumens was originally a fork of the Ripple system, that isn’t surprising.

Where Ripple is the centralized, profit-seeking corporate banking cryptocurrency, Stellar is a non-profit. Ripple appeals to large banks and financial institutions, but Stellar aims to provide low-cost banking to developing nations. Integrating cryptocurrency with individual remittances will eliminate most fees associated with the practice.

An Upgrade to Ripple

Originally envisioned in 2014, Stellar was hard forked from the Ripple protocol. Over the initial phases of development and multiple changes to the code base, Stellar decided to split entirely. They created their own network with a new code base and a new algorithm. That network went live in 2015 and gained serious traction throughout 2017. Their partnership with IBM, in particular, has catapulted them to the forefront of the cryptocurrency spotlight.

All of this came about from the desire to create an altruistic ecosystem for financial access. Underbanked and unbanked people lack basic avenues for advancement. Even those that leave to find more lucrative work often find their remittances to home torn apart by fees. Easing these issues provides more capital at home, which creates an environment where the home nation can succeed. Ripple has similar plans, but their framework is entirely within the larger financial sector – they consider remittances as a potential revenue source, but the altruism is lacking.

Stellar’s Lumen currency is in a position to provide that friction-less, low fee transactions necessary for this ecosystem. As adoption increases, Lumens will be more easily accessed by the people of the developing world. This is good for them, through the free flow of remittances to home, but also for investors who are gaining value.

Cross-Border Exchange and the Bridge Currency

Traditional banking institutions face several hurdles in exchanging money across international borders. First, they need someone looking to sell the local currency. Second, they need to be willing to accept the currency that the institution possesses. Finally, the associated government agencies need to take their cut of the transaction. Combined, this creates an inefficient market where everyone except the individual is making a profit. In order for that to change, a system that removes those inefficiencies needs to be developed.

Stellar is looking to be just such a system, using the advantages of blockchain technology to step around the hurdles entirely. To a certain degree, the US Dollar acts as a bridge currency for much of the world. Most countries are willing to trade their local currency for USD. There are not nearly so many willing to spend USD to gain exotic fiat currencies. They solve this by the internal use of the Lumen cryptocurrency. The system benefits from holding a reserve of all currencies, and to that end, it maintains Lumen-Fiat trading pairs. Fiat can be traded through the bridge currency at will, ensuring rapid transactions. The inherent digital, consensus nature of blockchain use ensures a low fee and avoidance of government interference.

Banking the Unbanked

The phrase ‘banking the unbanked’ is a catch-all used to suggest that there is a massive, under-accessed group of potential investors. That isn’t necessarily true, but there is an untapped group that would benefit from financial access. While a corporation looking to gain revenue may falter in entering this market, the non-profit status of the Stellar Foundation can make great strides. As they are not searching to maximize their exploitation of the new market, they can focus instead on providing the greatest service for the user base.

Success in that endeavor will still reap great rewards. Stellar is heavily involved in the upcoming Tel Aviv 2018 conference, and most fans are expecting some major announcements. That can always cause some heavy volatility in the price of a cryptocurrency, but the strong support base at the current price may help to push Lumens up above recent highs.

FinTech and the Future of Blockchain

We tout Blockchain technology as a cure-all to every technological issue that plagues us. While that may not be completely true, the advantages in the financial sector are blatantly obvious. Distributed ledgers provide a much-needed level of transparency and trust that has been sorely lacking. The greater the distance and the more steps involved, the higher the associated cost and the greater the counterparty risk.

If Stellar can bring secure, reliable banking to the developing world, it would be a complete game changer. Areas that had previously been stagnant or regressing would see advancement and new opportunities. This could create a domino effect that would see greater adoption and market share for the Stellar Lumens cryptocurrency – making it very valuable for the average first world investor as well.

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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Global Coin Report and/or its affiliates, employees, writers, and subcontractors are cryptocurrency investors and from time to time may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency.

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