This is the first post in a blog series on the ecosystem of cryptocurrencies. In this series, we plan on giving you a quick synopsis of other cryptocurrencies that are popular and rising, but you may not know a lot about yet.
Some of the details covered include how the company started, who the critical teams members are, and most importantly, what’s different about this blockchain. We don’t aim to make a specific recommendation, but instead look to give you a jumping off point to do your own research.
This week, we will be diving into the Stellar Network (or Stellar Lumens), the blockchain started by ex-Mt. Gox and Ripple co-founder Jed McCaleb.
The Hivergent Scorecard
- Name of the Blockchain: Stellar Network
- Cryptocurrency: Lumens (XLM)
- Year Founded: 2014
- Name of Managing Organization: Stellar Development Foundation
- Organization Status: Non-Profit Organization
- Important Founders: Jed McCaleb
- Key Partners: Stripe (Payment Network)
- Blockchain Most Similar To**: Ripple Blockchain
** This last point is highly subjective, as viewing the blockchain from various perspectives can make it compete or even complement many blockchains in the ecosystem. However, this metric can give you an idea of how other blockchains compare to one another, allowing you to better understand how major cryptocurrencies stack against each other.
The Hivergent Highlights
Jed McCaleb, Ripple and the Founding of the Stellar Network
The Stellar Network was originally founded in 2014 by Jed McCaleb. Before founding this blockchain, Jed was famous for founding Mt. Gox, the very first cryptocurrency exchange. He later sold that exchange to a partner and moved on before the company eventually folded.
Jed McCaleb then founded Ripple, a blockchain for making payments between banks cheap and efficient through the use of a distributed consensus network. While not technically a blockchain, it took advantage of many of the innovations of the Bitcoin blockchain to make the network run more efficiently.
Some time after joining, there appeared to be a rift between Jed and the rest of the team. There’s a lot of speculation on why this occurred, but the result of this was the creation of the Stellar Payment Network. Jed and a small team hard forked the Ripple codebase and created a competitor called the Stellar Network in 2014.
Originally, the Stellar Network was an alt-chain based off of Ripple. However, after looking at the consensus algorithm behind Ripple, the team decided to create a re-write of the code for the consensus algorithm. In November 2015, they relaunched their new and improved network with a newly named ‘Lumens’ cryptocurrency.
Stripe and the Rest of the Unbanked World
Being a hard-fork of the Ripple network, Stellar originally focused acquiring major banks, competing head on with Ripple. However, the Ripple Network has had a much broader success in this area, with the Stellar Network trailing far behind.
Because of this, much of their focus today is not on enterprise banking, but on trying to forge a relationship with the 2 Billion people without traditional banking today. They plan on doing this through a unique relationship with the payment network, Stripe.
When the Stellar Network first started, Stripe was an early backer of the organization, investing $3 million into the fledgling organization. With this relationship, Stellar is now launching a new payment network called Lightyear, focusing on being a payment network for the entire world, especially those without traditional banking today.
One interesting aspect about the Stellar ICO was the way they distributed of their cryptocurrency. When they launched in 2014, the non-profit maintaining the Stellar Network retained 20% of their cryptocurrency in order to give it away.
This called the ‘Bitcoin Program’, and the purpose of this program is to give away Lumens to current Bitcoin holders. Anyone who owns BTC can sign a transaction that deposits Lumens into an account they control. Leftover funds are re-distributed back to the organization. The first such distribution happened in 2016, and the next one is slated to happen in June of 2017.
This is one of the only organizations that I know of that are giving away their cryptocurrency. Whether this improves people’s usage of the cryptocurrency is yet to be seen, but it is an interesting way to distribute their cryptocurrency.
Why Does Stellar Matter?
Ultimately, the Stellar Network is not super radical in it’s own right. While it does have it’s own consensus algorithm, it still seems to be stuck in the shadow of it’s more dominant competitor Ripple. However, Stellar has one major player that makes it rather interesting, Jed McCaleb.
Jed has found himself on the forefront of the cryptocurrency industry since the founding of Mt Gox. While he’s courted a fair amount of controversy, it’s hard to deny that he hasn’t had a major impact on blockchain technology. Both Mt Gox and Ripple were revolutionary companies in an already extraordinary industry.
With the launching of Lightyear, it’s not unreasonable to assume that Jed could be the first to figure out how to get to these 2 billion unbanked persons. He and his organization have an uphill battle, but very few people have the experience that Jed has. It should be interesting to see what he continues to do.
Next week, we plan covering the NEM blockchain, a community built solution with a completely different way of managing block creating and growth. Sign up for our newsletter if you want to learn more about this and other important technologies.
More Resources for Further Reading
This guide was not designed to be a technical overview, but a jumping off point into the unique things about the Stellar Network. If you have further questions, here are some resources I recommend: