You may be wondering what Stellar assets are. The answer to that is, anything!
Simply, a Stellar asset is an electronic IOU. That IOU can be anything that represents a good, value, or service.
This ability to send and receive many varied type of assets makes the Stellar Network very powerful and flexible and opens it up to many use cases.
What Can Assets Be Used For?
Assets, known as tokens, are not created equal. Each asset, or token, can represent a specific good, service, or other value. Remember, a Stellar asset is an IOU that represents something else. Stellar assets can represent nearly infinite categories and specific values.
A good example of Stellar assets would be your PayPal balance. When you send money to PayPal from your bank account, you are in fact trading your USD (fiat currency) for PayPal’s token (which is an unnamed token as both you and PayPal pretend that the PayPal token is actually USD). PayPal promises to honor your tokens with a USD cash payout to the payee of your choice. With this in mind, we can see the similarity between Stellar assets and modern online banking, except that your Stellar assets are not regulated or controlled by any agency, such as PayPal, other than yourself.
A great example of a Stellar asset would be purchasing tokens for use at a batting cages. With those tokens we can receive a certain service, in this case we’ll receive 10 pitches for each batting cage token.
Another potential use case for utility tokens might be API access. A company may issue their utility asset on the Stellar Network which would grant the purchasing company the ability to make an API call in exchange for every 0.0001/th of that asset, for example. This would increase security for APIs and allow more flexible oversight from the API publisher.
Arcade companies might allow you to track your points and awards across any of their video game systems anywhere in the world by awarding you their Stellar asset based on your in-game performance. Finish first place in the race? Earn a token. 100 tokens? Upgrade your car’s engine. Playing the same racing game in an arcade in a different city? Login using your Stellar account and leave where you left off.
Another example would be a company that issues a Stellar asset that represents an share of their company. Holding this form of token would be similar to purchasing stock in that company on a traditional stock exchange.
With the above examples we can see how the IOU nature of Stellar assets can allow them to be used for representing value for nearly anything. We can simply see how a person can create a Stellar asset that represents gold, bus rides, movie tickets, game tokens, grocery store reward-program points, carbon emission credits, app store credits, and cash (US dollars, European Euros, English Pounds, and any other currency).
To reiterate, Stellar assets are IOUs that can represent anything.
Trustlines
We know that Stellar assets are IOUs. You should know that, just like a real IOU where you need to trust the person that gives you that IOU, you need to trust the issuer of the Stellar asset before you trade for it.
Let’s say that your friend gave you an IOU for a free beer the next time you go out for drinks but who is not trustworthy (an unverified issuing account). When you go out to the pub and you ask him to pay for your beer he might refuse! That IOU is worthless because of the person who issued it. However, if your other friend, who is well known to be an honest person (a verified issuing account) and always honors his word and promises, gives you the same IOU it will now be worth something.
Another example would be purchasing a handful of tokens at the batting cages where each token is advertised to give you 10 pitches. If you purchase 10 tokens you would then expect 100 pitches. However, before you even bought the tokens you had to trust that the batting cages operator was going to provide you the advertised entertainment (100 pitches) in exchange for your USD. If that batting cages operator was villainous he could potentially take your money, issue you tokens, and refuse to provide you with your pitches (a horrible experience, to be sure). Theoretically, the token that he issued are nearly worthless (internet tokens aren’t even stamped on cheap metal) and the only real value that you can receive is if he honors those tokens as advertised. In this example, the batting cages token are Stellar assets.
This is why on the Stellar Network you must first “trust” (also known as establishing a “trustline”) the issuer of each asset you wish to purchase.
Only trust issuing accounts that have a verified status underneath their name.
Trustlines have a limit and a balance. Initially, when you set a trustline, it has a balance of zero. The limit represents how much you trust the issuer of the asset. The balance represents how much of the asset you actually have. The balance can never be more than the limit.
Lumens (XLM) are the only Stellar asset that are automatically trusted, do not require trustlines, and do not have trust limits.
How Do I Buy Assets On StellarPort.io?
StellarPort.io makes it easy to quickly purchase a wide variety of different assets while using the Stellar Network. Here’s how you do it.
Step 1: Log in to your StellarPort account using your KeyStore file, Secret Key, or Ledger Nano S and navigate to the Exchange page.
Step 2: Select whether you want to change the asset you are trading or receiving. (Make sure to check your wallet to ensure you have enough of the asset before you make a trade.)
Select the “Change” button to change which asset you will receive.
Step 3: Type the abbreviation of the asset you would like to trade for. In this case we will be trading for Bitcoin (BTC).
As discussed above, it is important that, when you are choosing which account to trade with in the sidebar menu during this step, that you only select a verified account. The verified symbol ensures that the home domain (the website and agency stated on top of the asset card) has actually issued that specific asset from that specific account. This is a two-way verification between the issuing account and the domain name on the the Stellar Network. This verification process is required for the “verified” symbol to appear and helps prevent inauthentic, unauthorized, or malicious entities from issuing assets. It is not recommended to trade with accounts that are not verified since you would be receiving a token from an unknown and potentially illegitimate entity who may or may not honor that token.
It should be said that crypto asset trading in general includes a certain degree of risk and that even if the account is verified you must be sure to trust that account, a concept we discussed in the “Trustlines” section of this article.
Step 1: Type in the abbreviation on the asset (BTC). Step 2: Select the network you want the transaction to go through. Only choose a network that you trust. Step 3: Confirm the asset type.
Step 4: Determine your sell (or buy) type. Market sells will sell at the best currently available price, as will market buys. Limit buys and sell allow you to determine the price for your assets. Next, determine how much of your assets you would like to sell or buy. Finally, submit your order!
Step 1: Buy or Sell? Step 2: Market or Limit Order? Step 3: How much are you selling/buying? Step 4 :Place order!
Step 5: Congratulations! You’ve made a successful order submission! You should receive a prompt letting you know of your success at the bottom right hand side of the web page. Your order can be seen in the on-screen “Orderbook” in the appropriate section (buys or sells). If your trade was completed you can find the history of it in the right hand side column “Recent Trades”.
Issuers and Anchors
Any and all accounts on the Stellar Network can issue assets.
Accounts that issue assets are called “anchors”.
Private individuals as well as organizations and businesses can issue assets and act as anchors.
For more information on becoming an issuer and running an anchor check out the official documentation here Anchors: Issuing Assets and here Custom Assets.
Disclaimers:
StellarPort.io is not a member of the Stellar Foundation.
Additionally, I currently occupy a contracting position at StellarPort as a Developer and Marketer.