Cross-border payments are crucial for immigrants and refugees. It’s the main way for young people working abroad to support their families and boost national economies. Moreover, businesses across the globe co-operate and trade with each other on a regular basis. A great deal of work is outsourced to foreign talents, making cross-border salaries a new norm.
Global cross-border transfers were growing and accounted for $148 trillion in 2021, and are estimated to reach $155.9 trillion in 2022. So far, B2B remains the largest segment within cross-border payments worldwide.
To facilitate cross-border payments, many countries are working on their Central Bank Digital Currencies (CBDCs), as blockchain technology brings unconventional speed and cost benefits to international transfers. Besides, in many corners of the world facing military and economic crises, local fiat currencies become not only difficult to access, but unreliable as a store of value. Thus, crypto comes in handy to preserve the value of remittances. XLM issued by the Stellar foundation is one of the best cross-border cryptos offering simple, quick and low-cost transactions.
Stellar is an open, interoperable payment and currency system. It allows a user to create a redeemable, tradable representation (token) of any asset. The platform has global reach, near-instant transaction times, and ultra-low costs. Stellar’s unique nature is that a decentralised exchange (DEX) is in-built into Stellar’s ledger system. Thus, the protocol itself connects buyers and sellers. Users submit their bids or asks to the public network via a single, simple operation, and every few seconds compatible trades will automatically resolve. No middleman is involved and there are no intermediate custodians.
Stellar also allows a user to send one currency and have the recipient receive another via so-called path payments. Essentially, you can send and exchange money in a single transaction, without the traditional currency exchange process. The platform automatically finds the best conversion rate. Stellar’s advantage is that it works with any type of money (both fiat and crypto) as well as other non-monetary assets.
Stellar partners with IBM, Deloitte, ICICI bank, Flutterwave mobile payments, SureRemit, and even the Ministry of Digital Transformation of Ukraine to facilitate cross-border payments. The mobile-first software services provider Task used Stellar for its trial agro-rewards project too. It allowed agro-tech startups to partner with farmers in Cambodia and Thailand, sending remittances for very low fees ($0.00002) and in less than five seconds.
At the core of the network, there is a federated-voting consensus algorithm, the Stellar Consensus Protocol (SCP). It is based on voting in quorum systems, a fairly common approach among distributed systems and consensus protocols.
Stellar’s native cryptocurrency used to be called Stellar, but was eventually rebranded to Lumens. At crypto exchanges, it is represented by the abbreviation XLM.
XLM powers the Stellar payment network. The system automatically converts the sender’s currency to XLM, sends the payment via blockchain, and reconverts XLM to the receiver’s currency at the current exchange rate.
Unlike other popular cryptocurrencies, XLM cannot be mined or staked to receive rewards and increase the asset’s supply. Half of the initial supply was burned in 2019. Previously, there were 105 billion XLM in existence, with 20 billion in circulation. With this burn, the supply shrank to 50 billion.
Stellar apps and third-party services give users an easy way to transfer funds to their peers anywhere. You can also use the platform to purchase digital versions of different currencies – an indispensable option for people in countries that don’t have a strong national currency and want to use another currency for their savings.
Stellar is able to process transactions within five seconds. Technically, a high transaction speed implies that a greater number of transactions can be completed at once. Thus, even if there’s a sudden increase in use, the network should not become overwhelmed and cause delays of transactions.
Namely, the recent study by Forexsuggest.com, US-based platform for forex and stock traders, suggests that Stellar (XLM) has the most transactions per second (83.26) among all cryptocurrencies, almost 40 times higher than Bitcoin.
The transaction fee is very low (0.00001 XLM) – a small fraction of a penny at today’s prices. Even when the network activity is high and the fee rises, it is still quite cheap.