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How blockchains like Stellar will change cross-border payments forever

If you are a business that sells around the world or a person that sends money to friends and family via remittance then you probably already understand how time consuming and expensive it can be. In the case of a business deal it means less to the bottom line and in the case of a person it means less money to a friend or family member that needs it.

We’ve been using traditional banking and remittance services for decades, and sure they have implemented digital solutions in the last decade but in most cases as a layer on top of what already exists, no real innovation in the payment services that power the actual transactions.

In case of business this means dealing with SWIFT codes, delays, traditional banking fees and in some cases exchange rates that are not good for business.

In the case of persons sending money to family and friends it means dealing with high fees and in some cases daunting paperwork just to send a few hundred dollars (or less).

Sure there are companies that have brought innovation (Wise) and crypto has allowed tech savvy users to look for other alternatives, but most companies and people still rely on the traditional services to send and receive money/payments.

Blockchain (not just crypto) is changing this -fast.

While doing Bitcoin and Ethereum transactions with crypto wallets has been a way around some of the roadblocks around the traditional system, and even taking into account that larger commercial wallets have done a great job allowing users to convert crypto into FIAT currency, the blockchains that are most used at present time have many limitations.

First they are slow. Ethereum and Bitcoin have slow process and limitations in block creation. For example Ethereum needs about 20 seconds to create a block. Bitcoin? About 10 minutes!!

The other issue is that these blockchains have high (and growing) mining fees for every transaction. GAS fees are a big deal and can dictate how fast a transaction is executed, it’s also not very predictable, as it can vary depending on the time of day and the current demand on each blockchain.

Enter the new generation of Blockchain

Naturally organizations started to see these limitations and began to work on blockchains that solved these issues. Enter the new generation (and future) of blockchain.

Blockchains like Solana are built to withstand up to 50,000 transactions per second. They even have a game that people can play to try to “break it”, break.solana.com.

Solutions like Stellar (stellar.org) are changing payments around the world. Stellar allows transactions to be sent around the world and to be approved in 4 seconds!

A bit about them: Stellar is an open-source network for currencies and payments. Stellar makes it possible to create, send and trade digital representations of all forms of money—dollars, pesos, bitcoin, pretty much anything. It’s designed so all the world’s financial systems can work together on a single network.

Stellar has no owner; if anything it’s owned by the public. The software runs across a decentralized, open network and handles millions of transactions each day. Like Bitcoin and Ethereum, Stellar relies on blockchain to keep the network in sync, but the end-user experience is more like cash—Stellar is much faster, cheaper, and more energy-efficient than typical blockchain-based systems.

Stellar allows companies and people to send money around the world in real-time and with basically no costs (something like 0.00005 dollars at current time).

The Stellar network launched in 2014. Since then it’s processed more than 450 million operations made by over 4 million individual accounts. Large enterprise companies and companies as small as single-dev startups have chosen Stellar to move money and access new markets. The Stellar network has a native digital currency, the lumen, that’s required in small amounts for initializing accounts and making transactions but, beyond those requirements, Stellar doesn’t privilege any particular currency. It’s specifically designed to make traditional forms of money (Dolar, Peso, Euro) more useful and accessible.

For example, you can create a digital representation of a U.S. dollar—on Stellar you’d call this a “dollar token”—and you can tell the world that whenever someone deposits a traditional dollar with you, you’ll issue them one of your new tokens. When someone brings that “dollar token” back to you, you promise to redeem it in turn for one of the regular dollars in that deposit account. Essentially, you set up a 1:1 relationship between your digital token and a traditional dollar. Every one of your tokens out in the world is backed by an equivalent deposit. So while people hold the tokens, they can treat them just like traditional money, because they know that they’re exchangeable for traditional money in the end.

This allows organizations and people to transact in just about any currency, around the world and faster than ever.

Stellar also has a built in system to provide users with the best possible exchange rates at the moment of a transaction.

What’s next?

Naturally we believe that the inevitable changes to cross-border payments is coming, and coming soon. We believe that this is great news for business and people all over the world.

Of course as it could not be any other way, we are building solutions on top of blockchains like Stellar and Solana. Follow our Blockchain Studio for updates, some cool things are coming.