CryptoRated’s analysts recently reviewed Stellar (June 6, 2018) and its potential for success as a platform to connect banks, payment systems, and people.
As with each review, CryptoRated’s experts closely examine the project’s documentation, product, market, team, and token economics. Below we have included a portion of that review. For the full review, check it out here.
Stellar.org operates as a non-stock, nonprofit organization designed to connect people to global, low-cost financial services to fight poverty and maximize individual potential. The goal is to help fight the current financial conditions of the market (Long transaction times, bureaucracy, transaction fees, multiple dependencies on third parties, to name a few) and allow individuals to secure their future without having to worry about economic constraints. Founded in 2014 by Jed McCaleb, co-founder of Ripple, after running into philosophical differences with the rest of the Ripple board, the main difference between the two is their respective target audience; Banks and financial institutions for Ripple; Clients (People) for Stellar. The premise is that Stellar Lumens works as a liaison between people, banks, and the payment system. It aims to bring all your financial needs and requirements to a single platform, letting you perform transactions at any time and at any speed, near free of charge.
Target User Base
Large audience/wide market
Stellar Lumens’ target user base is truly immense. The majority of the population uses banks or any sort of financial instruments, either private or governmental, to carry out a multitude of different operations. Stellar’s global features, low-fees, high transactions speeds and ease of use, relatively speaking, are especially appealing to people in poor parts of the world, the ‘unbanked’ – people who do not necessarily or so easily have access to basic financial services, hindering their contribution to the economy and thus society, as well as hindering their own potential. Not only that, Stellar is also very appealing to traders – there are plans in place to improve the platform and offer more features including money remittance services and asset pairs trading.
Market Penetration Potential
Moderate; a good strategy is essential
Stellar’s market penetration potential is fairly high. Currently, Stellar has live payments set up to the Philippines (from Europe). There are efforts in motion to set up routes into a few African countries and many more plans in the works. There are dozens of partnerships, some with more known companies and some with obscure ones, and besides improving the already existing financial ecosystem Stellar is based on, one of 2018’s major goals is to successfully create and launch the Stellar Decentralized Exchange (SDEX), as well as implementing the infamous Lightning Network on top of their platform. Together with Stellar’s altruistic-on-paper principals and philosophies, and the team’s ambition to reach out to people in regions of the world without access to proper financial services, makes Stellar’s potential to penetrate the global markets and everyday use fairly high.
Few direct competitors (e.g., less than 5), or a leading solution; blockchain solutions only starting to surface in the sector
Stellar Lumens main competition stems from its ancestor – Ripple. Ripple provides an enterprise blockchain solution for global payments, by connecting banks, payment providers, digital asset exchanges, and corporates via the RippleNet network. Sounds very similar to Stellar Lumens, however, there’s one key difference, among others, and that difference is that Ripple is built and designed for enterprise use, and Stellar Lumens, who does offer enterprise use, has dedicated itself, at least in nature, to connect individuals through their platform, rather than provide increased functionality for banks and other financial service providers. Another difference between Lumens and Ripple is that Lumens is a non-profit and open-source technology that principally serves to promote fiscal availability and annexation, and the Stellar Development Foundation (SDF) has associated with the global operators of money transfer and many other financial institutions. Moreover, on paper, Stellar has far more use cases as its platform is more agile and versatile. It is a common misconception that Ripple has signed numerous partnerships while Stellar did not, and Stellar’s full list of announced partners can be found here.
Notable names include IBM, Deloitte, Stripe and more. Although Ripple and Stellar Lumens seem very similar, they are vastly different and should be regarded as such.
Remains unclear. It is true that Stellar packs it all – an altruistic motive, an elaborate system, active developers, constant updates and more. However, one should ask how exactly Stellar plans to bridge the gap between the current XLM holders and real people in places that do not provide proper financial services, or perhaps under conditions in which proper financial services are prevented. How do those people get and use Stellar’s platform? Since most of the Lumens out there were distributed away (See: Token Economy section), and most of Stellar’s volume comes from active trading – how does the project step forward and bridge this immense gap? There is a dire need to create another layer of ‘value’ to using the platform, running a validator node and in general, holding Lumens. The lack of legal review in the official documents doesn’t really help with coming up with a proper solution – it is clear that if Stellar expects to revolutionize the monetary system on a global scale, it has to face rigorous compliance and regulations, and so far Stellar did not address this issue properly. Except for expanding services geographically as well as expanded support, these questions remain unanswered and will dictate how successful Stellar will eventually be.
There are quite a few benefits to be achieved by using a distributed ledger technology like the one proposed by Stellar. A reminder: The mission of the Stellar Development Foundation (SDF) is to promote global financial access. SDF’s vision is an open and affordable financial system where people of all income levels can access simple-to-use, secure, and low-cost financial services. Using a blockchain fits right in. Transactions can be done in minutes or seconds, while currently, settlements can take up a week. Instead of relying on third parties, middle-men, and technical difficulties, transactions in Stellar occur almost instantaneously and are P2P. This is a major advantage for global transfers as well as local transfers. Imagine a person working abroad and sends money back to his family every month. With Stellar, he could transfer those funds to his family in a matter of seconds. Not only that, but he will incur practically zero fees. Using a blockchain also reduces counterparty risks, while increasing transparency, and therefore ironically – increasing trust in the system, which is designed to be devoid of trust altogether. A final point is that a key feature of using blockchains, in general, is that any data recorded is immutable. Any data that is recorded on a blockchain can be tracked in real-time, leaving a very detailed audit trail. As such, it eliminates error handling and reconciliation.
Global, infrastructural leadership; establishment of technological foundations and guidelines; paving the way for the future.
Mentioned earlier in different aspects of this review, Stellar’s core vision is very altruistic in nature, almost too altruistic in today’s capitalistic day and age. The grand notion – ‘help the unbanked’ – is commendable, but needs to hold true ground in order for it to bridge the gap between exceedingly optimistic catchphrases and a truly better and more even future. There are plans in place; the roadmap for 2018 isn’t very packed in terms of a multitude of new aspects and features, but certain key goals were set and now the team is actively pursuing them. Stellar’s github is updated every day, multiple times, and the team is active on social media – interacting with the community to improve the network (like setting out to implement Lightning Network). The team’s long-term vision is there – only time will tell whether Stellar’s hopes and dreams will come to fruition, or whether they are truly genuinely altruistic as they seem.
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