Anyone who’s tried to send money via an International transfer will know the traumatic, slow and costly process you have to undergo.
In an age of instant transactions, for some reason money conversion and international transfers are still stuck in the bricks and mortar, two working days, wired world.
Well a new project aims to bid adieu to the antiquated world of international money transfers and help drag the global financial system into the digital age. It’s called Stellar.
Stellar is an open source international currency transfer service. The system allows a user to send any currency from any country and have it arrive somewhere else in a different currency. The whole process is digital so any recognised currency could be converted. Theoretically you could upload £100 and have it sent to the USA in Bitcoins, Canada in Dollars and Russia in Roubles.
The Stellar project aims to open digital currencies to a far wider audience and provide users with a smoother, more efficient way of moving money across the internet.
Stellar transactions can be direct, as a peer-to-peer or can use a middleman known as a Gateway. This Gateway is a little like wallet where your money is held and distributed at your will. The Gateway replaces a traditional bank so has to be a trusted source or institution.
Let’s say you uploaded £500 to the gateway; you could then allocate $200 to the USA, 2,000 Rupees to India and 5000 Yen to your brother in Japan.
Bitcoin to Baht, Pound to Peso
Stellar is particularly useful as it can convert usually ‘difficult’ or ‘closed’ currencies. This is because the site acts as a link between currencies during a transaction.
By first converting the money into its own digital currency ‘Stellars’, the site can exchange any recognised currency into another. This means, for example, if you wanted some North Korean Won, but only had Euros, you could upload the money in Euros, convert it to Stellars, then have the Won taken from the Stellars.
For the time being Stella is a relatively ‘free’ service. Each transaction costs 10 microstellars (0.00001 stellars) which is basically nothing. As new user, you get 5,000 stellars just for joining. Currently, stellars have no actual value, but that can change over time if the system takes off.
As with all new concepts, especially in the financial world, Stellar has a few issues to iron out- chiefly attracting users and backers.
Stellars’ main developer Jeb McCaleb, worked with a similar idea a few years ago on a project called Ripple. Although Ripple is still going, it’s seriously struggled to attract a wider audience. Stellar appears to be McCalebs’ way of rebranding Ripple with updated features.
Regulation in the industry is also a little murky, especially when working online only currencies like Bitcoin and Litecoin.
For Stellar to really take off, it will also need the help and backing from mainstream banks, services and credit card companies. These are the areas the majority of people entrust their money to. If previous online currency exchanges are to be believes, such organizations will be reluctant to wade into a pool of uncertainty and shaky regulation.
In 2010, Jed McCaleb founded Mt. Gox, which would eventually become the world’s largest bitcoin exchange. McCaleb sold his way out of Mt. Gox before any of the serious security and legal action crippled the service.
He then went on to create Stellar’s predecessor Ripple, a similar online currency service. After years of slow development McCaleb left over disagreements about the value of its XRP currency.
Industry experts had hoped that the introduction of services like Ripple and Stellar would provoke more sales and promote use of the online currency Bitcoin.
At the moment users are simply hoarding Bitcoins due to its rollercoaster inflation path, and fluctuation in price. With the easier conversion path of services like Stellar, people will hopefully be encouraged to actually spend Bitcoins, rather than hoard.