Naveen Saraswat


Stellar Blockchain is the right platform for building next-gen FinTech Products. Here’s why

Blockchain Use-Cases

Ever since I heard of Stellar, a blockchain project to disrupt the financial world from a publication, I was intrigued. I guess it was around the time they’d raise $3 million from Stripe that I started exploring the potential of Stellar blockchain. The tech-media obsession and incessant comparison of Stellar with Ethereum and other blockchain projects by journalists across the world sure helped too in keeping me intrigued.

A few months down the line, me and my team had worked upon a number of POCs and explored the possibilities with the platform. Almost 2 and a half years down the line, today, our team has successfully worked on a number of products based on the stellar blockchain. In this post, I am going to explain why Stellar is the right platform for building Fintech products. First of all, I’ll discuss the basic pointers about the Stellar blockchain. Following this, we will discuss a few product ideas that can be made with this blockchain platform. So, without any further ado, let’s begin:

Basic Primer of Stellar Blockchain

The motto of Stellar and the people building it is to let people send and receive money across borders quickly, reliably and for fractions of a penny. It connects banks, payment systems and the users who are associated or interact with them and aims at integrating them so that the process of moving money can be done at almost no cost. With products built upon Stellar blockchain, the mobile money apps can be made interoperable with increased efficiency and decreased costs of the smaller transactions.

The Stellar blockchain has a decentralized and open database which enables it to maintain a confirmation time of 3–5 seconds. Not only this, since the Stellar blockchain is not programmed in a Turing complete language (Read: Faster than Ethereum Blockchain), the transactions-per-second rate is high too. The stellar consensus protocol, which we’ll be discussing in the article later, enables multi-signatures and smart contracts. Here’s how the Stellar blockchain works for cross-border payments:

Say you are trying to send a certain amount of USD to a person you do business with, let’s call him Kevin in Europe who will be receiving it in EUR. Now, if your’s and Brad’s bank are connected to the Stellar network as anchors. Once you try sending money in USD to Brad, transaction intent is forwarded to his bank in order to check whether Brad is compliant or not. Upon green light from the European bank, the funds are deducted from your bank account and then transferred to the stellar network in form of Lumens. Once the Lumens are inside the network, the money is sent to Brad’s bank and then credited into his account.

As most of you already know, the stellar blockchain is a decentralized, peer-to-peer network and an open ledger. Every detail of all the transactions is stored in the blockchain and it acts as a transparent and open ledger. Another important component of the stellar blockchain is what we call “anchors”.

So, What exactly is an Anchor?

In the Stellar blockchain, anchors can hold a deposit and issue credits to the participants as per the situation. Here’s what the Stellar foundation has to say about anchors: “They act as a bridge between different currencies and the Stellar network. All money transactions in the Stellar network (except the native digital currency of lumens) occur in the form of a credit issued by anchors.”

Anchors are instrumental for a streamlined functioning of the processes that happen in Stellar blockchain. Trusting the anchors is very important if you want to perform any action using the stellar blockchain.

Product Ideas Using Stellar Blockchain:

P2P Payments App- The widespread usage of P2P payments app such as Venmo is no secret. But building one using the blockchain technology was a challenge yet to be tackled before Stellar came around. If you choose to build a payments app using the stellar blockchain, the transaction charges can be maintained to be minimal and faster (order of 5 seconds).

By using Stellar blockchain as the underlying technology, you can enable low-cost and cross-border payments with very low minimum waiting time and low to minimize overhead costs.

Building Decentralized Exchanges— The stellar protocol has given a totally new meaning to building decentralized exchanges as the security in network is increased as independent servers with fault tolerance systems participate in the network.

The main difference between Stellar DEX and other centralized, or decentralized exchanges is that you control your own money. Your private key is in control of you and you alone. Unlike centralized exchanges, where these are stored in centralized servers, or Ethereum based exchanges, where these are stored in smart contracts, Stellar DEX gives you full power to control your money. This means no amount of hacking into the central servers or manipulation of smart contracts is going to make you lose your money. Things like this is what makes the idea to make a cryptocurrency exchange on the stellar blockchain a great idea. Read here for more on how to make a cryptocurrency exchange using stellar blockchain.

Asset Digitization — This is one of the most interesting use-cases that I’m still working on. And will be sharing details soon once our team has worked it all out. As a matter of fact, with the rising adoption and awareness of security tokens and tokenization, asset digitization has a great shot at true blockchain/crypto adoption. Products for asset digitization like Slice based on the Stellar blockchain are already in place.

Enabling the Sharing Economy — For those who haven’t been introduced with the notion and sheer magnitude of sharing economy, let me put it simply: It’s what the next industrial revolution is going to be about. Have a look at this video by a professor from Wharton. For a better understanding on how the sharing economy is shaping today, have a look at this post from Sodio’s blog: Dynamics of Sharing Economy.

But for sharing economy to be really feasible, developments in cloud technology, IOT and AI/ML are of paramount importance. But the real challenge would still be left far from being taken care of: “How do you get people to share their resources without a robust and proven payment infrastructure?”

For example, Say you build a platform where a person with mobile data while traveling lets others use it via hotspots. And since we’re the creators and believers of technology, let’s assume matching, metering, and whatnot — all will be done real smooth. But how does the person who shares his mobile data with others will get paid for? That’s where the stellar blockchain comes in as you can build payment platforms with it.

What Sodio has built using Stellar Blockchain — CashStash. Won’t be discussing cashstash as of now. Hope to do it in a future post!

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