Thanks to DeFi, Stellar wants to make the digital economy accessible to all, with new smart contracts and integration with Moneygram
Decentralised finance on Stellar is to all intents and purposes a novelty. Since its foundation, the peer-to-peer network for payments had never integrated smart contracts. However, things have now changed and the network is preparing to offer DeFi services and solutions. Discover the new smart contracts, Moneygram and DeFi on Stellar!
It’s smart contract time for Stellar!
Stellar‘s blockchain was launched in 2014 (shortly before Ethereum) with the ambition of improving the payment system that Bitcoin already offered in terms of speed and affordability. At the time, smart contract technology was in its infancy and did not seem useful for achieving the Stellar Development Foundation’s goals. Tom Weller, from Stellar’s development team, uses this analogy to explain the initial reluctance in the face of smart contract integration: “Imagine you are in the 1980s (am I a bit old-fashioned?) and you have to do some scientific calculations. Option one is to buy an expensive, slow and buggy PC. Or option two is to buy a fancy, purpose-built, simpler, faster and cheaper TI calculator. In other words, at the beginning of our industry, Bitcoin and Ethereum were more like PCs and Stellar was more like calculators’.
The SDF (Stellar Development Foundation) was very pragmatic. At the beginning of its journey and in light of its early goals, it was not worth working on building smart contracts. Over the years, however, technology evolved and 2021 was the year that Stellar entered DeFi with the introduction of the automated market maker (AMM) functionality in the protocol. With the huge success of this functionality, came the need for decisive growth and innovation for the network. In March of 2022, the SDF announced the development of Project Jump Cannon: native smart contracts for Stellar.
How do Stellar’s smart contracts work?
The strategy is to build smart contracts that ‘enable developers to grow the Stellar ecosystem and create new financial instruments to promote inclusion’, learning from all the innovations and research that has already been done. The cornerstones of Stellar’s smart contracts will be security, scalability and fair access: ‘with smart contracts, we will see more use cases on Stellar that will give more access to the digital economy,’ comments Weller. Project Jump Cannon is named after Annie Jump Cannon, a Harvard scientist whose contributions were essential to the understanding of the universe and the participation of women in science. Currently, the SDF is working on building a smart contract platform according to the WebAssembly model (WASM) also used by Polkadot and Elrond.
Objective No. 1: ‘Financial inclusion’
On 21 July 2022, the Lumen (XML) network reached 7 million accounts. The network is now used in more than 16 countries and handles hundreds of millions of dollars of transactions per year. In 2021 alone, the Stellar network processed more than 2 billion transactions, including 155 million payments. The digital economy that Stellar champions, however, is not yet widespread enough. It is said that the digital economy is for everyone, but who is included in “everyone”? Everyone who has an identity? Worldwide, however, 1 billion people have no official identity. Does this mean everyone who is a participant in the economy at present? One has to consider that 1 in 4 women do not have access to banking services, 60% of workers worldwide belong to the ‘cash economy only’. In light of this data, Stellar proposes to think of simple ways to include all the people who are cut off from the traditional economy into the digital economy. One of these ways is to facilitate the conversion of cash into cryptocurrencies and vice versa, in other words, to facilitate the use of digital money.
Stellar and the integration with Moneygram
To expand global access to cryptocurrencies and decentralised financial services, in January this year, Stellar entered into a partnership with Moneygram, one of the world’s most widely used peer-to-peer money transfer services. For Denelle Dixon, CEO of the Stellar Development Foundation, “the much-needed solution to the problem of switching from cash to crypto has arrived. Today, nearly 2 billion people rely on cash for their livelihoods, with no access to the digital economy”. By using Moneygram on Stellar, you can convert your crypto to fiat currency and vice versa, without necessarily having a bank account or credit card. This facilitates access to digital services for people who only use cash and is at the same time a quick and convenient way to convert crypto for those who routinely use blockchain as a payment system.
DeFi on Stellar is still to be fully built, the turn towards smart contracts will give the project a new face and set increasingly ambitious goals for the network that aims to be a global system for payments. Borderless and open to all!