Stellar Network: Use Case

Introduced in 2015, Stellar is an open network for storing and moving money, which seeks to enable all financial systems to work together on a single network. For this purpose, it provides a set of APIs and SDKs that help connect to the network and exploit its capabilities. They help establish a bridge between Stellar and the conventional financial network.

Traditionally, the most common method to move funds across borders has been bank wire transfers, which are time-consuming and expensive. Convoluted payment pathways use multiple institutions that are slow to initiate transactions and dictate high exchange rates and fees. Stellar replaces this international wire and currency conversion process with a single pathway, making transactions fast and efficient. Stellar's open network for moving value internationally with standard instructions provides a digital, fast, transparent, and open-to-all way to make payments.

As Figure 1 depicts, Stellar combines the power of a frictionless, blockchain-based payment pathway with a network of fully licensed fiat acceptance and distribution partners to provide on- and off-ramps to the world's currencies. These partners, called Anchors, move value on the Stellar network while accepting and paying out traditional money in their local geography. Anchors connect the Stellar network to standard banking rails so that all the world's currencies can interoperate on a seamless platform.

Figure 1. Stellar’s Cross-Border, Cross-Currency Pathway

Figure 1. Stellar's Cross-Border, Cross-Currency Pathway

A Stellar-powered remittance experience has a simple flow:

  1. The sender funds the transaction in their country.
  2. An Anchor receives the funds, and they are represented on Stellar in the form of stablecoins.
  3. The stablecoins are converted over the Stellar network into the recipient's currency using either the exchange rates of the Stellar Decentralized Exchange (DEX) or facilitated through a market maker.
  4. Funds arrive in the destination country and are transmitted to the recipient's bank account.